My Stock Winners

From a technical perspective, the SPY has pulled back and rests perched on support at its 40-day moving average, which has captured a number of the exchange-traded fund’s (ETF) declines since late July. The AMEX Diamond Trust (DIA: sentiment, chart, options) is also nestled close its 40-day trendline, seemingly prepared to use it as a springboard to launch it on the next leg of its uptrend.

Meanwhile, another layer of support lies at the 142 level for the SPY beyond its short-term trendline. This strike is the site of peak front-month put open interest with more than 67,000 contracts in residence, which can act as a roadblock against any additional declines.

Elsewhere, the S&P 100 Index (OEX) is once again at the lower edge of its recent trading range. Since December 14, 22 of the index’s 28 daily closes have fallen between 660 and 670. Even with the market’s sharp decline on Thursday and lackluster performance on Friday, the index managed to remain above the 660 level. Furthermore, the index’s rising 40-day moving average also resides near the 660 level, prepared to help lift the OEX higher.

However, there are a few sticking points to the week that could give traders pause. On Wednesday, the Street will be greeted with the release of the fourth-quarter Gross Domestic Product in the morning, while at 2:15 p.m. Eastern time. the Fed will release its thoughts on the economy and its decision on interest rates. As if that’s not enough to get the blood pumping, January non-farm payrolls will hit the Street on Friday. My experience has been that the market’s reaction to such events is related far more to the sentiment backdrop ahead of them than to the actual results of the event. For example, a bear could spin almost any employment figure as bearish for the market – too strong and a Fed rate cut is off the table; too weak and the economy is headed into the sewer. And a bull could do the same. So the key becomes whether investors are positioned bullishly or bearishly for the report, and based on the information I cited above I believe they are positioned bearishly, which enhances the potential for a positive market reaction. This would especially be the case if the VIX should rise further early this week toward its 2007 highs in the 12 and change area.

The broad market continued its retreat last week, with the Dow Jones Industrial Average (DJIA) shedding 0.62 percent and the S&P 500 Index (SPX) retreating 0.58 percent. This drop came as no great surprise, as the CBOE Market Volatility Index (VIX) for SPX options closed below the key 10 level on Wednesday. As we have observed in the past, closes below this round-number level have resulted in sharp, quick declines in the broad market.

This dip into single-digit VIX territory causes a fervor among nervous speculators, as buying put protection has suddenly become “cheap” on a relative basis. The increase in put activity thus creates a swell of selling pressure that pushes the market even lower as the short put positions are hedged. Yet, as we saw through most of 2006, this buildup of put open interest becomes a boon for the market as it not only supplies a layer of technical support, but the eventual unwinding of the shorted shares also provides the market with a lift.

Moving in for a closer look, the Standard & Poor’s Depositary Receipts (SPY: sentiment, chart, options) saw fewer than 95,000 calls contracts added among its near-term options since January options expired. On the other hand, put open interest soared by more than 194,000 contracts among the same series of contracts. As a result, the Schaeffer’s put/call open interest ratio (SOIR) for SPY hovers at 2.01, as put open interest doubles call open interest among options with less than three months until expiration. This ratio is also higher than three-quarters of all the readings taken during the past year.

But the growing pessimism among options players isn’t exclusive to the SPY. The composite SOIR for all equities dropped following the expiration of January options, but continues to linger near its annual highs, pointing to high levels of skepticism on the Street as traders cling to the belief that the broad market has run out of steam.

The double bottom is a major reversal pattern that forms after an extended downtrend. As its name implies, the pattern is made up of two consecutive troughs that are roughly equal, with a moderate peak in between.

Although there can be variations, the classic double bottom usually marks an intermediate or long-term change in trend. Many potential double bottoms can form along the way down, but until key resistance is broken, a reversal cannot be confirmed. To help clarify, we will look at the key points in the formation and then walk through an example.

Prior Trend: With any reversal pattern, there must be an existing trend to reverse. In the case of the double bottom, a significant downtrend of several months should be in place.
First Trough: The first trough should mark the lowest point of the current trend. As such, the first trough is fairly normal in appearance and the downtrend remains firmly in place.
Peak: After the first trough, an advance takes place that typically ranges from 10 to 20%. Volume on the advance from the first trough is usually inconsequential, but an increase could signal early accumulation. The high of the peak is sometimes rounded or drawn out a bit from the hesitation to go back down. This hesitation indicates that demand is increasing, but still not strong enough for a breakout.
Second Trough: The decline off the reaction high usually occurs with low volume and meets support from the previous low. Support from the previous low should be expected. Even after establishing support, only the possibility of a double bottom exists, it still needs to be confirmed. The time period between troughs can vary from a few weeks to many months, with the norm being 1-3 months. While exact troughs are preferable, there is some room to maneuver and usually a trough within 3% of the previous is considered valid.
Advance from Trough: Volume is more important for the double bottom than the double top. There should clear evidence that volume and buying pressure are accelerating during the advance off of the second trough. An accelerated ascent, perhaps marked with a gap or two, also indicates a potential change in sentiment.
Resistance Break: Even after trading up to resistance, the double top and trend reversal are still not complete. Breaking resistance from the highest point between the troughs completes the double bottom. This too should occur with an increase in volume and/or an accelerated ascent.
Resistance Turned Support: Broken resistance becomes potential support and there is sometimes a test of this newfound support level with the first correction. Such a test can offer a second chance to close a short position or initiate a long.
Price Target: The distance from the resistance breakout to trough lows can be added on top of the resistance break to estimate a target. This would imply that the bigger the formation is, the larger the potential advance.

Today, we got the fourth quarter results from Nokia’s cellular telephone sales, which can be added to the previous results from Sony Ericsson and Motorola. We also know how many Wiis were sold by Nintendo.
The OEM supplier for microSD cards is SanDisk and we know that SanDisk also supplies SD cards for Nintendo which makes the Wii. All the Nintendo Game Boy cartridges are delivered on the SanDisk flash product.
Therefore, we can estimate with reasonable accuracy, how many flash cards were supplied by SanDisk to these customers.
The three cell phone manufacturers noted above, delivered 200 million new cell phones this quarter. Let us assume that 10% of them, were the high end phones that use microSD cards. That makes 20 million phones. When you multiply that by an OEM price of about $25, that equals $500 million. You can then add 30% of the 3.2 million Wiis that were sold, which equals 960,000 units. You can multiply that by $50, which gives you a total amount of $48 million.
We now know that just those two end products equal $548 million of revenue.
We still have to add in the revenues from all the other flash products, as well as the MP3 products.
It is easy to see that SanDisk will have well over $1 billion of revenue. This is not even counting M-systems contribution.
I reviewed Daniel Amir’s last report for WR Hambrecht dated January 22, 2007,where he estimates that SanDisk will earn $977 million.
Therefore, I think that he is seriously underestimating SanDisk’s fourth-quarter revenue and we will have a marked positive earnings surprise, which should not be a surprise, if you do the calculations.
Therefore, fourth quarter estimates of $.69 per share are too low and we probably will see $.89 per share fourth-quarter earnings. That is my estimation.
You can clearly see that there will be blow out earnings. Now is the time to get into this stock at a discount.

Conclusion
SNDK is a long term buy at this price level

Gottaplay Interactive (GTAP), Inc. is rated one of the top ten video game rental services according to Top Ten Reviews. They are working hard to live up to their motto: “The Only Place to Play.” The Company features free home delivery and unlimited access to one of the largest gaming libraries available online. There are no due dates and no late fees. Members receive titles in 1-5 days and can play as long as they like. If they like a title, they can also purchase it if they so choose.

GTAP utilizes their own proprietary Game Distribution Software that contains an algorithm to accurately forecast levels of purchases and inventory. Distribution is achieved through a network of eight distribution centers linked to the GDS system. This enables the Company to optimize efficiencies in order fulfillment, inventory forecasting, procurement, inventory control, billing, and customer service. Customers even have the option of receiving text message confirmation that their order has been shipped.

GTAP uses their proprietary GDS system to create a custom interface for each subscriber to effectively merchandise their inventory and accurately predict subscriber preferences. Combined with a scalable, low-cost business model, this enables the Company to maximize revenue potential and minimize costs.

MARKET OPPORTUNITY

GTAP is already a leading online game rental subscription service providing a comprehensive library of about 3,500 titles to an existing base of subscribers at a cost of $20.95 per month. The Company has developed a strategy that is aimed at generating an explosive increase in subscriber growth over the next 12-24 months. The demand for video game rentals is as strong as it has ever been.

According to the NPD Group, while dollar sales were down slightly, total industry unit sales were up 4 percent over the same period the previous year. U.S. retail sales of video games (including portable and console hardware, software and accessories) reached more than $9.9 billion in 2004 - a decline of less than one percent when compared to $10 billion in the previous year.

Sales remained strong, thanks in large part to the console software, portable game software and portable game hardware categories, which saw dollar sales percentage increases of 7 percent, 11 percent and 10 percent, respectively. For the first time ever, sales of portable software titles broke the $1 billion mark. Total software sales also continued to set new records, with sales exceeding $6.2 billion, an increase of 8 percent in overall sales when compared to $5.8 billion in 2003.

Industry experts agree the video game industry has shown no signs of slowing down. No other entertainment industry has posted the sustained growth over the last decade as has been generated by the video game sector. Given the technological advances that are here now, all signs point to unprecedented growth and record sales over the next few years. GTAP has invested substantial resources to establish strong ties with various game developers and distribution providers to stay ahead of the curve.

As GTAP aggregates subscribers, their ability to pinpoint subscriber preferences should improve. This will enable greater operational efficiencies which in turn, should enable the company to lower costs. The OTC Digest believes GTAP has the potential to increase their profit margins as their subscriber base and other revenue streams accelerate. This creates a powerful opportunity to generate great profit growth and long-term success for the company and its shareholders. Management indicates holding approximately 21 Million Shares of the stock currently outstanding and appears very motivated to achieve positive results.

KEY MANAGEMENT

John P. Gorst - Chairman, CEO is a co-founder of GTAP and has directed all development and business efforts since November 2003. Mr. Gorst has over 17 years experience in founding entrepreneurial technology ventures, specifically in the development of software and business data services.

Prior to joining the Company, his experience included serving as CEO and Board Chairman of Insynq, Inc. a publicly traded application service provider. He was Vice President & General Manager for Interactive Information Systems Corp. and also operated a training/IS consulting business in conjunction with Nynex Business Centers of New York.

Mr. Gorst graduated at the top of his class as an Electronic Design Engineer from one of the top technology trade schools in Arizona. Mr. Gorst was also awarded a medal of honor for business leadership in 2001 and in 2006 from the National Republican Congress.

Asra Rasheed - President and COO has created several successful businesses in the multimedia marketplace. Ms. Rasheed was Director of Multimedia at Koyo Graphics where she managed large web development projects for clients such as Warner Brothers, Sanyo, and Sony. Ms. Rasheed also managed the development and growth of the online DVD rental and sales website for the largest distributor of Southeast Asian movies.

Prior to that, Ms. Rasheed founded NextRental.com, one of the first online video game rental companies and also served as Vice President of Business Development for Luminex Lighting.

Ms. Rasheed holds a BA in Finance from The School of Business & Economics at California State University, Fullerton, CA.

CONCLUSION

Gottaplay Interactive, Inc. GTAP has an excellent opportunity to achieve dynamic subscriber growth over the next several years. The Company has invested substantial resources to position itself among the nation’s top video game rental sites. It is a competitive business and senior management has spent a considerable amount of time “in the trenches” developing their proprietary software system, distribution channels and corporate partnerships.

As a result of their commitment to Customer Service, the company is building its reputation as one of the best sites for renting video games online. As the Company expands their services into the broadband and mobile phone arenas, additional revenue opportunities will present themselves. It appears GTAP is well-positioned to achieve significant revenue growth over the next 12-24 months.

Approximate Shares Outstanding: 30.7M
Insider Holdings: Approximately 70%

BTX Holdings, Inc. (OTCBB: BTXO) is engaged in the development of new strategies to utilize existing biomass waste for the production of alternative fuel and energy sources. The company is dedicated to finding innovative ways to help alleviate both the problem of waste disposal, as well as the increasingly contentious and thorny issue of America’s dependence on fossil fuels. Current methods of alternative fuel production depend upon costly and time-consuming processes, but BTX Holdings’ technology extracts specific components that will be more efficiently utilized in the processes that convert the feedstock (raw fuel) into the fuel end product, reducing the time and cost of fuel production.

Market News and Highlights

Built-in Supply: According to company estimates, the citrus industry generates more than 3 million tons of waste per year. This biomass waste is typically disposed of by dumping into landfills or by incineration. Unlike the raw materials like corn or sugarcane presently utilized by most alternative energy producers, this waste requires no additional production time and is available at a fraction of the cost, presenting substantial reductions in production costs.
Cutting-Edge Technology: BTX Holdings, through its subsidiary BioTex Corporation, utilizes three primary technologies, all of which it has either secured or is in the final negotiation stages of securing the global rights and/or patents. BTX has already reached an agreement in principle with Dexion International to acquire the worldwide rights to its patent application for Hypercritical Separation Technology (HST), a technology that allows for the separation of various substances such as sugar syrup, citrus oils like terpinen, linalole, myrcen, etc., and pectin pomace that can be viably employed in various applications like ethanol production.
Booming Market: With the recent volatility in oil prices, alternative energy has become a hot item. The total global oil and gas consumption is 127.8 million barrels per day, or 1,480 barrels per second (Source: OPEC.org). To respond to increasing demand levels that cannot be sustainably met by traditional fossil fuels, renewable sources of energy such as ethanol appear to be the logical choice. The market has begun to recognize the viability of these energy sources, and the worldwide ethanol industry is estimated to grow at a 30% annual growth rate through 2010 (Source: RNCOS). As this industry expands, the need for efficient and cost-effective sources of material are expected to grow as well.
Waste Reduction: BTX also utilizes the impressive BioReduction technology to substantially reduce biomass waste in terms of weight and volume. Currently, waste disposal often requires expensive solutions. Many waste producers pay as much as $85/ton, and there are new initiatives in New York that propose fixing the price at more than $125/ton. The BioReduction technology is capable of reducing these costs by more than 50%, providing a strong potential recurring revenue for the company.

Technically speaking, the QQQQ’s weekly relative-strength measure versus the S&P 500 Index (SPX) recently put in a new peak, which also coincided with the exchange-traded fund’s (ETF) declining 160-week moving average. Note that the measure also put in peaks in January 2004 and January 2007. Furthermore, the tech sector was also weak in the first quarter of 2005, even though the measure notched its peak in November 2004.

Furthermore, the QQQQ is currently trading near levels last seen on January 9. However, the CBOE Nasdaq Market Volatility Index (VXN) is lower than its January 9th levels, although 20-day historical volatility readings have declined on the pullback.

This continued complacency among traders on the tech sector despite an earnings season that is quickly turning into a wreck leaves the group vulnerable to additional losses during the near term, or at the very least, a period of underperformance versus the broader market.

SanDisk
Despite the pathetically low price,it will have a breaks up at this level. The stock is in a deeply deeply oversold state,only much more so now because many great things have happened since then.

The m-systems merger was completed. 2 top executives, Judy and Eli, noted and confirmed guidance of (for 3 yrs) 25-40%–WHILE THEY KNEW THE DETAILS about the flsh merger that was synergistically on-going but technically completed. They would not have confirmed guidance if they thought for a second that the move would be long-term dilutive. It is, in real terms, barely even short-term dilutive. In no case in the history of this company, has Eli given long-term projections that have turned out to be false. They have in fact always turned out to be conservative.

The 37 PPS has become a meaningless standard of measure at this point - even if just for the fact the two Qs have gone by. And remember when it hit 37? It was there for a blink of an eye, in forties the day of ER, and 50s within days of ER. And yet the shorts, in their euphoria fail to see the lofty reverse peak they are balancing on right now. Typical Mob psychology is what is at work here - classic case of “irrational exuberance.”

At this point, the shorts are thinking that the stock will move “15% either way” at ER. Not a chance. SNDK would have to miss by 15% and project seriously shrinking profits and GM’s to go down at all from here. This stock will relief rally just by virtue of the fact that Judy shows up on time at the CC. And what will happen? She will report great results, give firm carefully laid out guidance, and everyone will say, “Gee, there was nothing wrong after all.” Then the analysts will all raise guidance, but not ratings, and the stock, after the pop, will level off ans settle. Probably in the upper 40s at first but then the fifties. And still none of the shorts will cover, and Guana will be flirting with a sell rating like a old whore who flirts with underage boys. And he just might do it. And you know, I don’t care of he does, since SNDK is going blow WS and all their ridiculous misunderstandings and misstatements to hell this year. It doens’t matter what they say; action is character. Not meaningless words, and worse, lies. Yet, even these bastards will be forced to tack a buy rating on SNDK by the year’s halfway point, after they’ve cost their loyal clients a 50% run at least.

SNDK going much higher in 2007. All you need is more than 1-2 months foresight. This is an easy trade.

Weekly Market Commentary:

Last Friday’s University of Michigan consumer sentiment reading jumped from an expected 92 to 98, its highest level in three years showing that the U.S. economic is still very resilient. This did very little, however, to rally equity markets which finished the week with very little change from last week.

The Dow Jones Industrials (12,556.08, -9.46) and S&P 500 (1,430.50, -0.22) spent the week drifting, while the Nasdaq Composite (2,451.31, -51.51, -0.22%) and Russell 2000 (785.16, -9.10, -0.11%) gave up only a bit more ground than their larger cap brethren.

It only took house Democrats 15 days to enact the first net tax increase since 1993, with the passage of Energy Bill HR6, which didn’t receive much play in the major media. Perhaps the reason stocks, and most notably tech stocks, turned in such a lackluster performance. The good news appears to be that since last July’s low, growth stocks have been outperforming value stocks.

On Monday, the Conference Board reports the December leading economic indicators index forecasted to be up 0.2% following November’s 0.1% reading, and opening arguments will be heard in the Lewis “Scooter” Libby case surrounding his “outing” of Valerie Plame as a CIA operative. On Tuesday, the nation will look forward to President Bush’s annual State of the Union message.

Wednesday, the Energy Department issues its weekly report on crude oil inventories, the last of which showed a big up tick in supplies that sent prices to a 20-month low. Also, the Mortgage Bankers Association reports on its weekly survey of loan origination applications. That’s followed up by Thursday’s December existing home sales report from the National Association of Realtors expected to show continued weakness in that sector.

Earnings season continues, with a host of companies due to report throughout the week. Thus far, according to Zack’s Investment Research, the ratio of firms beating fourth quarter estimates was a decent 2.2 to 1. However, tech watchers are urged to note that consensus estimate revisions for 2007 have thus far been “noticeably weak” with three reductions for every upward revision.

Stay tuned!

Bullish
Sector trading above its…
20-day Moving Average: NO
50-day Moving Average: YES
100-day Moving Average: YES

Sentiment:Pessimism remains strong against the housing sector. Of the 158 analyst ratings offered up on the components of the housing sector, Zacks reports that 42 percent come in at a “buy.” What’s more, options players have loaded up on bearish bets toward the sector.

Outlook: Technically speaking, the index dropped below support at its 20-day moving average, but has reclaimed its ascending 50-day trendline. Furthermore, the index’s recent rally has pushed it back above former round-number resistance at the 30 level.

Bullish

Sector trading above its…
20-day Moving Average: NO
50-day Moving Average: YES
100-day Moving Average: YES

Sentiment:Pessimism continues to permeated the telecom sector’s sentiment backdrop. The composite Schaeffer’s put/call open interest ratio for the sector has risen to a reading of 1.2, as put open interest outnumbers calls open interest among near-term options. This reading is also higher than all but two of those taken during the past 52 weeks.

Outlook:The Telecommunications HOLDRS Trust (TTH – 34.65) appears to be bouncing off support near its rising 100-day moving average. Furthermore, the exchange-traded fund (ETF) continues to enjoy the support of its ascending 10-week and 20-week moving averages.

Major markets across Europe are set to move into positive territory Thursday morning, taking cues from upbeat sentiment in Asia and a rebound in oil prices. Corporate results will guide trading sentiment for the day with little economic news due for the day from Europe. Traders are also likely to digest a slew of economic reports from the US for signals on developments in the world’s largest economy.

European markets fell on Wednesday after stronger than expected US economic data, triggered concern that the U.S. Federal Reserve will delay interest rate. Energy and mining stocks slipped on falling crude oil and copper prices, putting further pressure on the markets. The U.K.’s FTSE 100 index fell 0.18% to 6,204.50, while France’s CAC 40 index slipped 0.53% to 5,561.78. Germany’s DAX index declined 0.23% to 6,701.70.

On Wall Street, markets saw some weakness during trading on Wednesday as troubling inflation data generated some negative sentiment. The NASDAQ underperformed the other major averages by a wide margin, although they all ended the session in negative territory. The Dow Jones Industrial Average closed down 5.44 at 12,577.15, while the NASDAQ closed down 18.36 at 2,479.42 and the S&P 500 closed down 1.28 at 1,430.62.

The weakness in the US markets came after the Labor Department released a report showing that its producer price index rose 09% in December following an unrevised 2.0% increase in November. Economists had been expecting a more modest increase of about 0.5%.

The increase by the index was due in large part to growth in food and energy prices, but the core producer price index still rose 0.2%, above economist estimates of a 0.1%. While the data raised some concerns about the pace of inflation, some traders refrained from drawing any conclusions ahead of the release of the Labor Department’s report on consumer prices on Thursday.

In the after hours trading, PC maker Apple reported first quarter results revealing a 78% surge in profit. The company posted 24% revenue growth, driven by strong holiday sales of Macintosh computers and iPod music players. Apple’s quarterly earnings and revenue breezed past Wall Street as well as its own expectations. However, the company forecast second quarter earnings and revenue below analysts’ current consensus estimates.

In commodities space, crude for February delivery closed up $1.03 at $52.24 a barrel after hitting a low of $50.28 a barrel. Oil prices extended gains in Asian trading on Thursday and lingered above $52 a barrel.

In Asia-Pacific, all markets, except Shanghai, were in positive territory during the day’s session. Tokyo benchmark Nikkei closed up 109.58 points at 17,370.93 as the central bank left its key interest rate unchanged at 0.25% with a split vote of 6-3.

A slew of corporate results hit the wires early Thursday to steer trading action. Swiss drug major Novartis AG reported that fourth quarter net income climbed 23% to $1.66 billion from $1.35 billion last year. Net sales for the quarter rose 16% to $10.05 billion from $8.66 billion a year ago. Looking ahead, Novartis sees group net sales are rising in 2007 at a mid- to high-single-digit rate in local currencies and net sales in the Pharmaceuticals Division at a mid-single-digit rate for the year. Novartis also announced European Commission’s approval for Exforge as a new and highly effective single-pill treatment for patients with high blood pressure.

Elsewhere, German pharmaceutical giant Merck KGaA posted an 18% rise in fourth quarter profit. Quarterly sales rose 9% to EUR 1.63 billion. Full year revenues from Liquid Crystals were up 21%, while Ethicals sales increase 11% led by oncology drug Erbitux.

French cognac and spirits major Remy Cointreau revealed organic growth of 5.6% for the Group’s own brands and 2.2% in overall organic growth for the nine months to December. On Wednesday, the stock gained on rumors that drinks and spirits giant Diageo plc’s distribution joint venture with Moet is on the verge on termination. The development, if true, is expected to result in Diageo bidding for Remy Cointreau.

Still in France, train maker Alstom posted revenue growth of 15% for the third quarter. The company expects annual sales to grow by 10% in fiscal year 2006-07 from the previous year

British retailer Kesa Electricals reported that total Group revenue increased 8.1% in local currency and 6.4% on like-for-like basis during the Christmas trading period. Sales were helped by the strong demand for new technologies, particularly flat screen televisions and multi media, and the continued return to positive growth for white goods.

Belgian supermarkets chain Delhaize Group posted fourth quarter same store sales growth of 2.2% in the U.S. and 2.7% in Belgium. The company reported fourth quarter sales growth of 4.6%.

A report in Le Figaro said European insurance major Allianz SE is buying the 42% stake in Assurances Generales de France SA, which it doesn’t already own, for about EUR10 billion euros or US$13 billion. The report did not mention any sources.

In the UK, the Board of London Stock Exchange Group plc, on Thursday issued its second shareholder circular in response to the offer posted by Nasdaq on 12 December 2006. The LSE urged shareholders to reject the Nasdaq’s offer which it deemed “wholly inadequate”.

The major economic reports due on Thursday are November Retail sales data for November and ZEW survey for Switzerland. Fruther, the ECB is slated to release its Monthly Report.

In the US, economic data is likely to remain in focus on Thursday, with the Labor Department due to release its report on consumer prices in the month of December. Economists expect prices to increase by 0.4 percent, while core prices are expected to edge up 0.2 percent. Traders will also be presented with data on housing starts, weekly jobless claims, leading economic indicators, and business activity in the mid-Atlantic region.

Additionally, trading may also be impacted by traders’ reaction to stellar quarterly results from Apple. Merrill Lynch, Harley-Davidson, Bank of New York and UnitedHealth are among the companies that will release their results before the start of trading on Thursday, while IBM is among those that will report after the close.

Stock:
HDFC Bank Ltd. (Symbol: HDB)

Entry Date:
16/January/2007

Entry Price:
Long above $78.20

Stop Loss Price:
Close position below $75.10
HDFC Bank Limited, a private sector bank, provides financial services to corporations, and middle and upper-income individuals in India. It operates in three divisions: Retail Banking, Wholesale Banking, and Treasury Operations. The Retail Banking division provides various deposit products, loans, credit cards, debit cards, third party mutual funds and insurance, investment advisory services, and depositary services. The Wholesale Banking division offers loans, deposit products, documentary credits, guarantees, bullion trading, foreign exchange, and derivative products, as well as cash management services, clearing and settlement services for stock exchanges, tax and other collections for the government, custody services for mutual funds, and correspondent banking services. The Treasury Operations division manages debt securities, money market operations, foreign exchange, and derivative products. In addition, it provides telephone, Internet, and mobile banking services. As of December 22, 2006, the bank operated 569 branches. The company was incorporated in 1994 and is headquartered in Mumbai, India.

Stocks bounced back. It was a solid week on the Street for equities last week, as the S&P 500 Index (SPX) jumped 1.6 percent, ending just shy of a new multi-year high. What’s more, the Nasdaq Composite (COMP) soared 2.8 percent, closing above the 2,500 level for the first time since February 2001. The tech sector remains a hotbed of strength as we continue to see rotation out of oil-related securities and into tech stocks. Speaking of oil, crude remained on the downward slope, as the February futures contract shed six percent for the week and is down approximately 13 percent since the start of 2007.

Looking ahead to this week, we find the market poised for what could be a very good week for stocks. One reason for broad-market strength is the simple fact that we are once again approaching options expiration. During all of 2006, the Standard & Poor’s Depositary Receipts (SPY: sentiment, chart, options) finished only three expiration weeks in negative territory, while the average return during the week comes in at a gain of 0.62 percent. Below I have list the weekly gains for the SPY during expiration week.

“I think one potential reason for the upside bias in expiration weeks is the unwinding of heavy out-of-the-money puts that accelerates during that week. As these out-of-the-money puts are bought back to capture what little time value is left, those who took the other half of the trade and sold the puts are able to buy back the SPY shares they sold as a hedge against the short put position. This unwinding action in turn helps to add buying pressure to the SPY during this week.”

Furthermore, options players are adding to this argument, as traders continue to focus on the exchange-traded fund’s puts. On Thursday, open interest at the trust’s out-of-the-money strikes grew and continued to see brisk trading throughout Friday.

In addition, put open interest for the S&P 100 Index (OEX) continues to swell. On Friday, the Schaeffer’s put/call open interest ratio (SOIR) for the index jumped from 1.48 to 1.59, as roughly 1,300 call positions were liquidated and nearly 12,000 puts were added. This reading is now just seven percent shy of hitting a new annual high. However, this isn’t the start of the trend for the index’s SOIR. The ratio has steadily climbed from a near-term low of 1.37 on January 8 to its current perch, as puts are added at a faster pace than calls. The hefty accumulation of puts at the 660 strike for the OEX leaves the index well supported and seemingly bullishly positioned.

Technically speaking, OEX rallied back to resistance at the 665 level on Friday. This region hindered the index’s advance on January 3 and on December 18. My sense based on past such situations is that if 665 is taken out we could get to 670 very rapidly.

Turning back to the technology sector for a moment, Apple (AAPL: sentiment, chart, options), IBM (IBM: sentiment, chart, options), and Google (GOOG: sentiment, chart, options) are facing round-number resistance and big call open interest at 100, 100, and 500 strikes, respectively. It will be very interesting to see how this plays out by this Friday’s expiration. As if to add more fuel to the fire, Apple is scheduled to report earnings on Wednesday, January 17, and IBM will post its results on Thursday, January 18.

While I’m no big fan of these names, they could benefit greatly from the natural bullish bias of the market from the unwinding of the various index puts as we approach expiration. And once above the strike, they could benefit from a delta-hedging surge. The latter would depend on whether the open calls were bought to open (delta-hedging possibility) or sold to open (resistance would heighten as the stock rallies further above the strike due to selling of shares by those long the calls).

However, the market does face a couple potential obstacles. One would be the 800 level for the Russell 2000 Index. This round-number region has hindered the small-cap index’s rally attempts since early December.

A second obstacle is the 10 level for the CBOE Market Volatility Index (VIX – 10.15). Since November, broad-market rallies have have stalled when the VIX has moved into single digits, and we are only a few ticks away from these levels as of Friday’s close. I expect the market to ultimately begin accepting single-digit VIX readings as simply a reflection of the underlying low level of realized volatility, rather than as a sell signal or as a signal to buy “cheap” puts. But for the short term, the market faces a challenge every time the VIX sports a “nine-handle.” Perhaps the best prognosis for this expiration week would be a quick and sharp pullback on Tuesday that pops the VIX back toward 11, and then a steady rally during which the VIX pulls back grudgingly toward 10.

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Insider Transactions
Insider Purchases - Purchases 16,000
Total Insider Shares Held 389.15K N/A
% Net Shares Purchased 4.3%

Technical Indicator
Upside Trade Trade indicators for long trades
Upside ReCalc™ : Adjust the upside trade & breakout parameters. ( Stock Price: 6.92 )
- TRADE QUALITY 85%, V. Good
- Good trade quality is a combination of good profit, profit/loss ratio and target potential.

- TARGET 1 Price: 7.66 Profit: 10.7% , for a typical rally.

- TARGET 2 Price: 7.89 Profit: 14% ,

Profit/Loss Ratio: 5.2 : 1 - Excellent