Wednesday’s Options Alerts

• May 21, 2002
• TradingMarkets Editors

The major market averages continued to
slide today. The Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) had another triple-digit loss, thanks in part
to Home Depot
(
HD |
Quote |
Chart |
News |
PowerRating). Tech stocks were again the biggest losers today as the
Nasdaq
(
$COMPX |
Quote |
Chart |
News |
PowerRating) dropped another 2% despite a reiteration of earnings from
Qualcomm
(
QCOM |
Quote |
Chart |
News |
PowerRating). Brokerage stocks were initially strong after Merrill Lynch
announced a $100 million settlement with the New York State Attorney over
misleading analysts’ practices. Other brokerages could be next. Defense issues
such as gold
(
$XAU.X |
Quote |
Chart |
News |
PowerRating) and utilities
(
$UTY.X |
Quote |
Chart |
News |
PowerRating) were again strong
performers for the day. For more information on today’s action, please refer to
the market
recap.

Volatility once again ended higher,
signaling that fear is coming back into the market. The VIX
(
$VIX.X |
Quote |
Chart |
News |
PowerRating) opened near the bottom third
of its range and closed near the highs of the day. This shift in intraday
sentiment again suggests an increase in fear. Today’s action generated a CVR
VI sell signal. The VXN
(
$VXN.X |
Quote |
Chart |
News |
PowerRating) opened near the lows
of the day and close near the highs of the day. This also shows an increase in
fear.

Points of Significance:

Home Depot
(
HD |
Quote |
Chart |
News |
PowerRating) dropped over 7% on
triple its average volume. Yesterday, the shares ran up on anticipation of
earnings results. The shares sold off hard today despite the company reporting
results that increased 35% and beat expectations by 3 cents. Apparently traders were not
happy with Home Depot’s same-store sales increase of 5%, compared with Lowe’s
rate of 7.5%.

Peoplesoft
(
PSFT |
Quote |
Chart |
News |
PowerRating)
dropped 8% on heavy volume. The shares were down again after the company
reported on Monday that it hasn’t seen an increase in customer spending.
Peoplesoft did break below support today. Check out the July 20 puts as they are
somewhat cheap.

Ford
(
F |
Quote |
Chart |
News |
PowerRating) jumped over 5% on double its average volume.
The shares gapped back up above its 200-day moving average today after Merrill
Lynch upgraded the stock from “neutral” to “strong buy."
Ford shares did back off after hitting its .618 retracement from its November
high.

Photoronics
(
PLAB |
Quote |
Chart |
News |
PowerRating) fell over 4%
on below average volume today. Shares of Photronics dropped below its .50
retracement from its December lows. There is very heavy activity in the December
22.50 puts.

Abnormal Options Volume With Price Movement
—
Abnormal options volume (calls and puts) with stock price movement

Stocks With Biggest Spikes in Implied
Volatility — Stocks with biggest increases or decreases in implied
volatility compared to previous day

Spike Up

Spike Down

Please use stops on every trade!