Tread Lightly, Look For Retracement Opportunities

• March 23, 2001
• Tony Saliba

Just
as in each large rally we had over the past few years, we’d get a
breather while some profit taking went on… yesterday’s snatching of
respectability from the jaws of embarrassment felt like that to me. We were just
about to see the cheerleaders on your favorite talk-em-up TV show have to
contemplate a “Welcome Back to the 8000s” party for the DJIA. This
morning’s gap opening may be nothing more than that… the opening. But still
the same, a well-turned spread will save you the embarrassment that comes along
with unsightly facial stock. (As in “You’re wearin’ it.”)

Sweet 16

“The money’s got
to go somewhere,” the folks on the elevator say… “US stocks still look
better than most alternatives.” But a lot of last year’s winnings are due.
We have 16 trading days until we have to write the check to Uncle. Some of the
liquidation has been for that reason, and we’ll see more into this taxing home
stretch.

With most of these
stock prices, it seems as though we are living with a bunch of “teen-angels,”
and the downside isn’t as great as it was even two months ago… but don’t
forget about the possibility of reverse splits. Some of these companies split
their way to nice tight market-cap-to-price ratios, and with their prices
feeling the gravitational pull to single digits, may consider a reverse split to
prevent extinction on some money managers’ lists.

I also think stock
repurchase programs may be in store for those companies with any reasonable cash
position, which will dampen the aforementioned slide and why I like butterflies
here. What I’m saying is that I don’t see any run-away rallies through April
expiration. And if we get some bottoming action for the spring and summer, it
will yield a slow grinding move… also good for butters and condors.

Let’s see what
we’ve got this morning:

Pre-open
order volume was light this morning. Overall, call sellers led buyers 3:2, while
put sellers led buyers 3:1.  In pre-bell activity,
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AMAT |
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call sellers outnumber buyers 4:1.
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LU |
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call sellers led buyers 2:1.
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DELL |
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call sellers crushed buyers 2:1. 
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AEIS |
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call sellers beat up buyers 4:1.
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GLW |
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call buyers dominated sellers 6:1.
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QCOM |
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call buyers led sellers 2:1 on heavy activity

First
hour order volume was extremely light, registering a 1.7 on a scale of 1.0 to
10.0, with 1.9 being the current 30 day moving average.
Overall, call sellers led buyers at slightly over 2:1, while put sellers
led buyers 3:2.  In first hour activity,
(
AMAT |
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buyers 7:1, while put buyers trounce sellers 2:1.

(
TXN |
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5:1.  AOL call buyers showed up
leading sellers at almost 3:1. 
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LU |
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call sellers crushed buyers 8:1.
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AMAT |
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call sellers crushed buyers at a whopping 23:1. 

(
ADBE |
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buyers 6:1.
(
AAPL |
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trounced sellers 7:1

I
look forward to more of your questions: tonys@tradingmarkets.com