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Technology Stocks : LSI Corporation
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To: Bread Upon The Water who wrote (25458)12/4/2002 1:02:54 PM
From: E_K_S  Read Replies (1) of 25814
 
Hi William - Generally the short seller will cover their long shorts sales by selling naked Puts. As a result, you should see the open interest for the "in-the-money" Put contract expand and at a faster rate than the "out-of-the money" Calls. When the open interest expands in the forward months for the calls, especially at a higher strike price, it signals more speculative buying.

It's just one of many signals I watch and for the first time in several months LSI call activity seemed quite active for the Jan $10's. The confirmation will be the company earnings which if the speculators are correct should begin to be positive in the next two to three quarters.

This of course can change based on investor sentiment and other macro-industry trends. I also monitor the moving average of the Call/Put ratio for the forward months and watch this indicator over time. If the open interest ratio of Calls to Puts increase over 2:1 and break out above the MA, it is just another confirmation that speculative call buying has occurred.

You are correct that short seller trading (and their corresponding hedging strategies)influence the supply and demand for the equity but from my observations these trades only tend to amplify the longer term price movement.

IMO, the key for a long sustained rally in LSI or (any of the semiconductor stocks)is when and how long the industry can begin the next semi up cycle which tends to last 18-24 months. Everybody's guessing at this point but recently the CEO of NSM stated that July 2003 was his view of when this would occur.

Eventually, time will tell and there will be a few false starts along the way but the new up-cycle will happen.

EKS
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