Option Investor>
QCOM - Qualcomm Inc. $384.44 (-0.31)(+17.69)(-10.94)
QUALCOMM Incorporated is a leader in developing and delivering
innovative digital wireless communications products and services
based on the Company's CDMA digital technology. The Company's
major business areas include CDMA phones; integrated CDMA
chipsets and system software; technology licensing; and
satellite-based systems including OmniTRACS® and portions of
the Globalstar(TM) system. Headquartered in San Diego, Calif.,
QUALCOMM is included in the S&P 500 Index and is a 1999 FORTUNE
500 company.
We couldn't have scripted this play any better. QCOM behaved
exactly as expected finding support at higher-lows on low
consolidating volume. If the channel holds, $368 +/- will be
the new support. Also textbook-like, resistance came at $390
(actually $392) before heading down again. In Friday's euphoria,
QCOM found support at $383, but we think there will be dips to
buy along the way to a probable breakout. Remember, QCOM is
forming an ascending pennant on the chart, which generally
portends a breakout on huge volume. What will drive the volume?
The 4:1 split (which will be voted upon at a special shareholder
meeting on Dec 20th - any objections?) which will likely be
effected quickly thereafter; and then the prospect of QCOM making
an announcement of the disposition of its handset business at the
same time. Barring the normal market fluctuations or a market-
wide meltdown, look for entry points on ascending support and
sell points at $390 as long as volume remains low. We are not
suggesting this will be the date (it could obviously happen
sooner or later), but December 9th or 10th is the graphical
convergence date. It is also well into the time period when
a typical split run takes place. When you see big volume move
the price over $392 and Dec 20th hasn't happened yet, get on
the train, but don't give up give up your judgement. Until
then, plan your trades using support and resistance just like
any other.
The news is above, but some words of caution before you jump in:
don't buy December strikes and sit on them. The time decay will
eat us alive with only 2 weeks to go, not to mention that they
will be worthless 3 days before the shareholder meeting. As we
noted Thursday, if you can stomach the price, look at and
consider the JAN strikes so you don't get the stuffing knocked
out of your account from the rapid time decay. For the
intestinally fortified, selling ATM puts could produce a turbo-
charged return, but also carries nitroglycerin-like risk.
HIGH PREMIUM ALERT !!
Another good strategy for this play would be to go long the
stock and write covered calls at or out of the money. The
premiums are so inflated that even an ATM contract with
10 trading days remaining can yield roughly a 5% return
until December 17th.
***December strikes expire in 2 weeks***
BUY CALL DEC-370 AAF-LN OI=2577 at $29.25 SL=22.00
BUY CALL DEC-380 AAF-LP OI=2194 at $23.00 SL=18.00
BUY CALL DEC-390*AAF-LR OI=2188 at $18.13 SL=14.00
BUY CALL DEC-400 AAF-LY OI=3501 at $14.38 SL=11.50
BUY CALL JAN-380 AAF-AP OI=1240 at $47.88 SL=37.50
BUY CALL JAN-390 AAF-AX OI= 741 at $45.00 SL=35.00
SELL PUT DEC-360 AAF-XL OI=1108 at $ 8.00 SL=10.25
(See risks of selling puts in the play legend)
Picked on Nov 16th at $330.00 P/E = 302
Change since picked +54.44 52-week high=$406.13
Analysts Ratings 6-8-4-0-0 52-week low =$ 24.50
Last earnings 11/99 est= 0.88 actual= 0.91
Next earnings 01-19 est= 0.95 versus= 0.33
Average Daily Volume = 5.9 mln
Chart = quote.yahoo.com
****
JDSU - JDS Uniphase $251.19 (-14.81)(+52.19)(+13.81)
Uniphase Corporation is a fully integrated optical electronics
company that designs, develops, manufactures and markets fiber
optic telecommunications components and modules and laser
subsystems. The Company's telecommunications products include
semiconductor lasers, high-speed external modulators,
transmitters, fiber Bragg gratings and optical modules for fiber
optic networks in the telecommunications and cable television
industries. Based in the Silicon Valley, California, they
employ approximately 6260 people worldwide. Customers include
Lucent, Nortel, Cisco and Ciena. American Express owns 10% of
the common shares.
"Dear God, please let there be one more company like Intel to
invest in, and I promise not to mess it up this time". Here's
your big break. JDSU makes the laser modules and pumps (in
addition to other components) that split a fiber optic strand
into many different, potentially unlimited channels. Effectively
they do for light what Intel does for electrons. Their
components are critical to the development of optical networks.
Here's another incredibly profitable play since Wednesday's dip
to $221 - JDSU is up 14% in 2 trading days. Watch the downside
with protective stops so you don't lose the profits. Support is
still OK at $245-$248; short-term resistance at $262 followed
much later at $270-$273. At current levels, we are in the middle
of the ascending channel. Volumes, though at or slightly above
the ADV have fallen back from levels seen in November, which may
indicate a slight consolidation. That wouldn't be a surprise
given that the 2:1 split won't occur until December 30 - it's
a bit early for a split run and JDSU has come a long way in a
hurry. In short, it needs a break. It is still tradable for
short-term gains. Just be sure to target shoot in your comfort
zone
Big news has been a bit sparse with the major news of a split
4 weeks away and earnings about 6 weeks away. But note from
Thursday that Dain Rauscher Wessels issued a Strong Buy rating
with a price target of $300. That follows Wednesday's
reiteration by SoundView of their Buy rating. Note too that
JDSU has doubled analyst expectations over the last 6 quarters.
Cockroach theory says that where there's one, there are many.
With optical equipment so much in demand NT, LU, CSCO and TLAB
will keep JDSU hopping. This could also be one for the long-
term portfolio or IRA, especially with juicy premiums suitable
for writing covered calls.
***December strikes expire in 2 weeks***
BUY CALL DEC-240 UQD-LH OI=1266 at $21.63 SL=16.75
BUY CALL DEC-250*UQD-LJ OI=2069 at $15.50 SL=12.00
BUY CALL DEC-260 UQD-LL OI=1311 at $11.63 SL= 9.25
BUY CALL JAN-250 UQD-AJ OI= 960 at $31.88 SL=25.00
BUY CALL JAN-260 UQD-AL OI= 617 at $27.75 SL=21.50
Picked on Nov 21st at $213.81 P/E = N/A
Change since picked +37.38 52-week high=$273.62
Analysts Ratings 13-13-0-0-0 52-week low =$ 26.31
Last earnings 10/99 est= 0.25 actual= 0.29 surprise= 16%
Next earnings 01-24 est= 0.30 versus= 0.14
Average Daily Volume = 2.7 mln
Chart = quote.yahoo.com
|
