Buy US Foodservice (UFS) at 15 or LOWER

UFS had a strong day with heavy option volume, but what was really eye-opening was the fact that implied volatility has nearly DOUBLED over the past two days -- from readings in the 65% area to current levels above 130%. As you might expect, there is a strong takeover rumor -- with a rumored price in the low 20's. This is a high-risk situation because the stock had previously been under pressure after a downgrade about a month ago (although other analysts at the time said that the stock was severely undervalued, a fact which may have attracted a corporate buyer). Stock volume patterns are weak, which is a negative, but they ARE improving. A wide stop is necessary here -- use 13 as a mental, closing stop initially.

We bought Theragenics (TGX: 13-11/16) at 13-1/2.
The mental closing stop is 11-1/2.

Previous Holdings: 
ALL STOPS ARE MENTAL CLOSING STOPS UNLESS OTHERWISE NOTED.

Longs:

Amkor (AMKR: 45-11/16, -1-13/16) -- the stop is 43. 8x8 Inc. (EGHT: 20, unch) -- RAISE THE STOP TO 15.

Epitope (EPTO: 11-11/16, +11/16) -- the stop is 10.

ESC Medical (ESCM: 14-9/16, +3/8) -- made another new high. SELL ENOUGH TO REDUCE YOURSELF TO HALF YOUR ORIGINAL POSITION. The stop is 12.

Glenayre Tech (GEMS: 13-5/16, -3/8) -- the stop is 13.

Nextlink calls (NXLK: 108-7/8, -8-3/8; QNFCT: 11-1/2, -6-7/8) -- took a beating after Craig McCaw said he is selling 5 million shares (9% of his holdings). The stock probably over-reacted, but that's why we take partial profits when we can -- you never know what will happen. The stock is still in an uptrend. The stop remains 100 for the remaining calls. Speedfam (SFAM: 26-5/8, +1-5/8) -- made a new high as stock volume patterns remain EXTREMELY strong. RAISE THE STOP TO 23.

Amer. Mobile Satellite (SKYC: 27-5/8, +5/16) -- recovered nicely late in the day Thursday. The stop is 22.

Pricing Information

Monthly (fax or email) $199 $149: autorenew Quarterly $435, save $162 over monthly Annual $1495, save $245 over quarterly Seven Day Trial Free

Finalist in the
"2003 Readers'
Choice Awards"
voted by readers of

Shorts: Positions which profit if the underlying declines in price.

Johnson & Johnson (JNJ: 73-3/4, -2-3/8) -- made another new low. LOWER THE BUY STOP TO 80.

$OEX put spread ($OEX: 731.16, -5.14; 750-720 spread: 13-3/8, +1-1/4):hold.

Breadth suffered terribly during the huge market.

Oscillator : -425.38 * decline, and it can't recover as fast as the market does, so it's not surprising (or overly negative) to see it finish with a poor reading. This has pushed the oscillator below -400, a level which usually precipitates a short, sharp bounce in the market. Still, this market is not out of the woods yet.

Symbol Avg.Volu VolToday Calls Puts High Low Close Change IV

COMS(THQ) 18726 37535 28922 8613 83.38 76.00 83.00 5.38 18
ICGX(QIG) 1049 2772 2674 98 29.50 26.00 29.00 2.00 20
MWD 3350 15161 12140 3021 70.25 66.13 69.00 3.25 2
SLVN(NQV) 338 2611 2561 50 16.00 13.50 15.75 2.75 -15
SMTC(QTU) 242 1974 1773 201 79.75 71.00 75.88 2.50 18
UFS 140 3348 3166 182 14.75 12.75 14.38 1.88 93

Other High-Volume Situations:

3 Com (COMS) -- continues to be strong and active in advance of next week's spinoff of its Palm Pilot unit. Stock volume's very positive. Support: 76.

ICG Communications (ICGX) -- had fairly heavy call volume once again (the 2nd day in a row), in advance of next Tuesday's earnings. If this activity persists on Friday, we'll probably make a speculative buy prior to the earnings announcement. Someone may know something.

Morgan Stanley Dean Witter (MWD) -- is nearing old highs, but stock volume patterns are just mediocre. A close above 72 would be positive.

Sylvan Learning Centers (SLVN) -- announced abominable earnings (loss of 39 cents vs. an expected profit of 20 cents), but rose anyway because SLVN is funding an internet incubator unit. Stock volume's positive, but there's very heavy resistance in the 16-18 area.

Semtech (SMTC) -- after the close, announced earnings of 29 cents vs. 27 cents expected. Prior, it had made a new high on improving stock volume patterns. There is support at 70.

High Implied Volatility: AutoDesk (ADSK), Anadigics (ANAD), Antec (ANTC), Becton Dickinson (BDX), 3 Com (COMS), Dallas Semi (DS), Eaton (ETN), Semtech (SMTC), Transaction Systems Architects (TSAI), US Foodservice (UFS).