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Saturday, August 16, 2003

Bulls Touting Stocks Higher -- Bears LIcking Their Chops. Will Gold Get Going?
With the Dow industrials back above 9,100 you may be hearing talk of a bull market run. I am skeptical of such talk. My technical work indicates the likelihood that a bounce up to the 9,400 level would represent a tremendous selling opportunity. Time will tell. Meanwhile, gold has been quietly consolidating. If the US dollar resumes its fall, you may anticipate gold and mining shares to again get moving. So now, without further ado, here is...

This Week's Option Recommendation

Buy the Anglogold October $35 call for $125, or less, good this week.

Shares of Anglogold Ltd. trade on the New York Stock Exchange under the symbol "AU". The symbol for this reco is, "AU_JG". AU shares closed Friday at $32.20. The $35 strike call is an "out-of-the-money" option, with its premium for time and volatility only. The 52-week range for AU is $19.75-$38.69. Your broker can give you more information on the South African gold mining company, but I will tell you why I like a call recommendation here.

Gold and mining shares are having a quiet summer, but they are approaching the point of a likely breakout. It is not a certainty that the move will be higher; but it is likely. It is very difficult to reverse trends in currencies and a plunging dollar should get the next leg of gold's bull market moving. My target for AU shares is a move up toward $40. If AU rises to $40, each $35 call will have an intrinsic value of $500. If AU is at or below $35 on the third Friday in October, your option will expire worthless. That is your risk.

That's buy the Anglogold October $35 call for $125, or less, good this week.

Open Option Positions Review

Last week's recommended Avon October $60 put, for $150 or less, was not officially triggered.

The Coca-Cola August $45 call closed at $95: Sell/Hold. Use bounces to sell. Shares may try to rally against $45-$47.50 resistance.

The JP Morgan September $30 put closed at $45: Hold. Key resistance is at $36.09-$36.52.
The Wal-Mart September $50 put closed at $50: Hold. Key resistance is at $56.70-$57.51, with support at $52.50-$54.50 and $47.50.

Make sure you close out your July positions before Friday's expiration.

The Sony July $25 call closed at an intrinsic value of $702: Sell. You may want to instruct your broker to "exercise and immediately offset" in order to lock-in the real value of your options.
The Microsoft July $27.50 call closed at $40: Sell. MSFT is trying to move higher and may move this one back "in-the-money".
The Johnson & Johnson July $60 call, the Qualcomm July $45 call, and the Newmont Mining July $27.50 put are likely to expire worthless.

Steven Sarnoff, Editor

Steve's Sony pick is up 357.33% and Coke is also up 153.33% as of July 14, 2003.

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