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Technology Stocks : Applied Materials No-Politics Thread (AMAT) -- Ignore unavailable to you. Want to Upgrade?

To: Jerome who wrote (17223)	1/17/2006 10:22:11 AM
From: Gottfried	Read Replies (2) \| Respond to of 25522

Jerome, good to see you're still around. :) Your method - or any ST method - surely seems superior to holding through all the hiccups. I think the only thing that keeps more of us from doing it is the fear the stock will run away after we sell. Gottfried

To: Jerome who wrote (17223)	1/17/2006 1:52:43 PM
From: Proud_Infidel	Read Replies (1) \| Respond to of 25522

Five Stocks Facing Formidable Resistance Bernie Schaeffer, Options Advisor, 01.17.06, 10:30 AM ET CINCINNATI - After the market closes on Friday, Jan. 20, all January-dated equity options go the way of the dodo. With expiration just a few trading days away, I noticed a number of popular names that are currently hovering close to strikes that are home to peak call open interest in the front-month series. This suggests that these stocks will have a tough time making much headway anytime soon. There are three reasons that out-of-the-money call strikes with large open interest can act as resistance: -- A large amount of call open interest can define a point of extreme market optimism, which usually coincides with the depletion of buying strength. When this strength has been depleted, it takes less selling activity to change market direction. -- The individuals who sold these options to speculative investors may buy the underlying stock to balance their bearish position from selling the options. These long positions will ultimately be sold when the options expire or the call buyers unwind their positions. -- Call sellers that do not hedge their position will try to pressure the equity as it approaches the strike at which the calls were sold to protect themselves from losses. Furthermore, stocks trading in the money have a tendency to be drawn back to strikes with significant levels of open interest as expiration approaches. Applied Materials (nasdaq: AMAT - news - people ) is one security that is trading near peak call open interest at the $20 level. The equity rebounded off support at its 80-day moving average on Jan. 3 and has rallied through $20. However, with more than 54,400 calls sitting at the $20 strike, it will be interesting to see if the security will be pulled back to the round-number level during the next several trading days. Of course, the February series has more than 14,000 calls waiting to move to the front of the line once January options expire, adding a new potential stumbling block to the stock's rally. Allstate (nyse: ALL - news - people ) popped higher on Tuesday, busting above the $55 level, which is home to more than 48,500 calls in the January series. However, the shares are now beginning to pull back to this strike. This could prove to be a temporary setback for the shares, as call open interest in the back-month series is still extremely light. IAC/InterActiveCorp (nasdaq: IACID - news - people ) enjoyed a brief foray above the $30 level on Jan. 6 and Jan. 9, but has since retreated from the round-number region. This strike currently houses nearly 42,000 call contracts. Furthermore, the $30 level rejected the shares in late July and early August, adding strength to this area. Fast food guru McDonald's (nyse: MCD - news - people ) has edged above peak call open interest at the $35 strike. However, the shares have struggled with this region in the past. In December, the stock experienced some choppy trading around $35 before finally settling below that strike just before options expiration. In December, peak call open interest resided at the $35 strike with more than 33,000 contracts just before expiration. At the moment, 76,000 calls sit at this strike in the January series. Special Offer: Click here to download "Oil and Gas: Slam-Dunk Investing for Income and Capital Gains," a special report from Professional Timing Service. After a bout of choppy trading, Microsoft (nasdaq: MSFT - news - people ) finally managed to creep above peak call open interest at the $27 strike. With a mind-numbing 287,800 contracts at the $27 strike, and another 129,900 contracts at the $27.50 strike, the security has quite a quagmire to slog through during the next couple of sessions. The heavy call open interest doesn't necessarily make these stocks an automatic shorting opportunity. However, they are invariably a tough long, especially if you're buying time premium. The reason? Heavy covered-call writing forges a self-fulfilling sideways bias, and heavy call buying creates natural resistance after the activity peaks.