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Technology Stocks : JDS Uniphase (JDSU) -- Ignore unavailable to you. Want to Upgrade?

To: Guy Gordon who wrote (1822)	11/7/1999 10:31:00 AM
From: Guy Gordon	Read Replies (1) \| Respond to of 24042

TA, JDSU, QCOM, trendlines and channels. Several people have asked me for more charts on trendlines. A lot of this is relevant to JDSU only as it shows why JDSU and QCOM are dangerously high priced right now. If you're not interested in Technical Analysis please skip this and subsequent posts. I expect this is going to take me more than one screen. [Stand back everybody. Give him room!] Note: I advise you to open a second browser window to look at these charts while reading my commentary. You can do this by right-clicking on the link and selecting Open in New Window. First, I want to show you why I pay attention to trendlines. white-crane.com shows my chart of Sartek. On 10/20/99 SRT hit a high of $69 per share, and was at the top of its channel. This was the time to buy protective puts or even sell the stock. The odds were that it would return to the 26-day Moving Average (MA). Buying put there would have saved you at least 32% of your investment, as three days later SRT was at the bottom of the channel at $47 per share. Worse yet, it then fell out of the channel and is now trading at $35 and still going down. A channel represents what the market thinks the stock is worth. The support line at the bottom is where lots of buyers think the stock is cheap, and the resistance line at the top is where lots of owners (and short sellers) think the stock is over-priced. There's nothing magical about it -- it's just herd mentality. The stock price overshoots in both directions. Channels can trend up, down, or sideways. An up-trending channel usually means that the company's prospects are looking better, and more buyers are realizing it. The channels themselves also overshoot in both directions. A good, strong up-trend channel will take the stock price well above any reasonable level. When there are no more buyers to recruit, and the selling pressure becomes great enough, the stock will break the channel. This is often triggered by bad news (such as earnings). The stock then has a long way to fall. The entire point of channel analysis is to get you into up-trending stocks at good prices, and to get you out of them when they fall off the trendline. Please look again at the 50% loss in SRT. At the peak of $69, on the edge of the precipice, everyone was euphoric. Investor's Business Daily wrote about the company. The Champagne corks were popping. This could happen to you. OK. I'm going to break this message here, and go on to the next page.

To: Guy Gordon who wrote (1822)	11/7/1999 11:02:00 AM
From: Guy Gordon	Read Replies (4) \| Respond to of 24042

TA, JDSU, QCOM, trendlines and channels - continued. OK, let's get to my chart of JDSU. white-crane.com As you can see, JDSU is a strongly trending stock. Some stocks meander all over the place. But JDSU has been in a tight channel for an entire year, as it moved from $20 to $200. As you look at this chart, here are some things to ask yourself. 1. Can this last forever? Can JDSU continue up at a rate of 1000% per year for another year? If not, when should you get out? 2. Given that JDSU is as high as it has ever been above it's support line, should I buy, sell, or hold? Please realize, here, that I am not talking about the future of the company, which is grand. I'm only talking about the stock price. JDSU is clearly over-valued at this price. I love this company. I want to own this stock for years. I just don't want to lose all the money I made last three weeks. Three weeks ago, JDSU sold for $116 per share. Thursday it hit $204. That's a rise of 76% in three weeks! Yes, the news was great. Earnings, mergers, new coverage and upgrades, write-ups in IBD. I'm euphoric -- time to sell. Except... well, two things. First, if I sell Uncle Sam and Georgia will take 34% of my profit, and I won't have that money to reinvest. Second, I want to own JDSU for the long term. What to do? My answer is options. There are two strategies. The obvious one is to buy protective puts. Yes, the premiums are high. You could also pay for those puts by selling at-the-money covered calls. (Selling covered calls alone will not protect you all the way down to the 26-day MA). Another strategy would be to sell deep in-the-money covered calls. For example, you could sell the Nov or Dec $150 call for about $50 per share. (Deep calls usually sell for near the difference between the stock price and the strike price.) Then you buy back the call before expiration. The idea here is that you are selling to top of the stock -- you are selling all the stock movement above the strike price. If the stock goes up or down you don't make or lose money. Please don't take my advice on options without thinking it through yourself or getting professional advice. I am not a stock broker or financial advisor. I am an experienced investor, with only a little experience with options. I could very well be wrong. I especially invite commentary on my strategy of selling deep covered calls and then buying them back when the danger is over. This is not a common options strategy according to the books I've read. Is there a hole in my idea? Let's move on to QCOM on the next page.

To: Guy Gordon who wrote (1822)	11/7/1999 6:14:00 PM
From: Thomas Tam	Read Replies (2) \| Respond to of 24042

So what happens if JDSU gets added to the S&P 500, which we would all expect sometime given their importance in the information technology arena? Whether you feel the market cap is 34 billion or 47 billion, upon inclusion into this index could lead to an instant buy order of 10 million shares which we kill all the shorts in quick time. However, I think they will pull a Q and issue a secondary to satisfy the funds and build a warchest for additional acquisitions. They have an opportunity to harm the gorilla Cisco with the sword they (JDSU) wield. That's why you see the urgency in Cisco trying to leverage their stock to acquire optical networking firms. That's why Nortel is having a fit with the raiding of their researchers by a subsidiary of CSCO. JDSU will not go away and any drop should encourage additional buy in from everyone out there looking to get a piece of "the Intel of the Telecosm"* (borrowed from G. Gilder) If Cerent is worth $9 billion, as a "start-up", then is JDSU truly overvalued? Same rationale as the guys the bid up Sycamore and other infrastructure IPOs to the stratosphere. Relatively, JDSU is cheap. Was much cheaper a year ago when I was looking at JDU at $15 canadian and didn't pull the trigger, for multiple stupid reasons. At some point in time in this very bullish market, you have to forget valuation issues and just buy and hold the companies that will be here for the next decade and beyond. That's a part of the basis behind the gorilla game, be the biggest and exert your influence to increase market share. Although JDSU is a king in the eyes of Gorilla Gamers, the opportunity for JDSU to become a gorilla is possible. If they can continue to leverage their stock and products to add parts of the puzzle (components for a true optical network) they can get themselves a lock in the industry. Why wouldn't Lucent, Nortel, Acatel, all the other telecommunication equipment providers use JDSU product if they can provide the modular systems at a cheaper cost and with fewer integration problems. Sorry for the long rant, but the excitement in the stock is truly justified. Later