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    Issue No. 15 – February 28, 2005 Prescott, Arizona Systems@WiserTrader.com

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Newsletter watchlist data may precede web site data by up to one week until further notice

1.0 Leading Sectors

Energy

      Option Alert No. 6 sent on 2/23/05 was for Valero Energy Corporation (NYSE: VLO) September $70.00 Call with the symbol VLO IN.  The stock’s price went from $67.15 to a Friday close of $72.90.  This activity took the option from its maximum recommended entry price of $7.00 to a Friday close of $10.70.  The option’s theoretical (Black-Scholes) fair value went from $8.49 to $11.61, making it still undervalued.  The position remains open.

      Valero Energy Corporation is an independent refining and marketing company that owns and operates 15 refineries with a capacity of approximately 2.4 million barrels per day. About 82 million barrels of oil are consumed world wide daily.  Valero produces reformulated gasoline and diesel fuel meeting California Air Resources Board specifications, low-sulfur diesel fuel and oxygenates (liquid hydrocarbon compounds containing oxygen). Valero also produces conventional gasoline, distillates, jet fuel, asphalt and petrochemicals.  Valero markets branded and unbranded refined products on a wholesale basis in the United States and Canada through bulk marketing and through a network of more than 4,500 retail and wholesale branded outlets in the United States, Canada and Aruba.

      For the fiscal year ended 12/31/04, revenues increased 44% to $54.62 billion. Net income applicable to Common totaled $1.79 billion, up from $617.2 million, an increase of 190%. Revenues reflect additional volume from refinery operations acquired. Earnings also reflect higher equity in earnings.  The price to sales ratio for this stock is 0.36 even though the stock price has increased 133% in the past 52 weeks.

© 2005 WiserTrader.com, LLC. Members of wisertrader.com are neither licensed brokers nor licensed advisors.   Trades discussed represent trades made by the editor for the wisertrader.com portfolio.  The newsletter and web site are for information only and should not be considered as personal advice.   While it is believed that the posted information is factual, mistakes can be made in transcription.  Investors should trade stocks only after verifying all information and consulting with a licensed broker or adviser

Basic Materials

Valero is not the only energy stock going wild.  The entire sector is in a sprint along with the Basic Materials Sector.  One company that will benefit from increasing orders from Asia is BHP Billiton (NYSE: BHP) that operates out of Australia.  BHP Billiton Limited is diversified exporter of metallurgical coal for the steel industry; an exporter of energy coal; a producer of iron ore, copper, nickel metal, manganese ore, aluminum, manganese and chrome ferroalloys. It also has substantial interests in oil, gas, liquefied natural gas, diamonds, silver and titanium minerals.

      For the six months ended 12/31/04, revenues increased 41% to $14.47 billion. Net income increased 89% to $2.64 billion. Revenues reflect increased product prices. Higher income also reflects higher operating margins and lower borrowing costs.   The stock has been on the rise for some time with its price increasing 53% in the past 52 weeks.  It has a trailing PE of 20 and a forward PE of 13 with a 5 year PEG ratio of 0.73 which makes it interesting, although it does not fit into any of the watch lists.  As inflation picks up, it will be seen first in energy and materials prices.

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1.2 No Discount on Trading System Seminar

      Plans are being scraped to obtain a group discount for a trading system development seminar given by Rockwell Trading.  The level of response was very low.  Anyone interested in learning to develop his personal trading system should contact Rockwell directly using the Investment Links page on the web site.  Rockwell is listed under the Education category.

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1.3 When to Sell

      A number of tools are available for entering option trades.  Equally important is having a plan for when to sell. Briefly, there are a number of major schools of thought on the subject that either involve the use of technical indicators or fit into a scheme of overall money management. These exit strategies all address the same basic problems of protecting profits, avoiding a profitable trade turning into a losing trade and avoiding large draw downs in capital. 

      The first and most difficult strategy to master involves monitoring the stock price and volume while in an option trade.  Volume is a confirming indictor.  Upward price movement on higher than average volume is a hold signal.  Downward price movement on higher than average volume is a potential sell signal.  One needs to be ever mindful of resistance and support levels defined by any recent clustering of prices that have occurred, respectively, above and below the current stock price. When a stock’s price rises toward resistance, watch for the sell signal that price bounces off resistance.  It can fall substantially lower. If price rises through resistance one should hold.  When a stock’s price falls toward support and bounces upward, it is a hold signal.  If price falls through support it is time to sell. When clusters of prices that define support are substantially below the current price, the 7 day simple moving average is a good price support level to use.  This is especially true for stocks at their 52 week highs.  These are just a small sample of many potential signals that can be gleaned from technical indicators. 

      Money management sell indictors involve the use of trailing stops.  First, in the case when no more than 4% of the total capital is used in a single trade, a -25% trailing stop prevents no more than 1% of total capital being lost in a single trade.   Second, when capital is divided into 90% long term investment and 10% risk capital, and no more than 25% of one’s risk capital is involved in a single options trade, a trailing stop loss of 35% to 50% is considered acceptable.  This prevents no more than 0.875% to 1.25% of one’s total capital being lost in a single trade.  Third, when a trading system is used, the trailing stop loss F_L is set based on the average profit per trade F_P, the fraction of trades in the correct direction F_C and the average fractional gain per winning trade F_G, according to the profit-loss model F_L = F_P – F_C F_G / (1 – F_C) that has been discussed over the past couple of weeks.

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 THE ALCHEMIST       by AL THOMAS

            HOLY GRAIL INVESTMENTS

     Every year I go to the Money Show in Orlando, Florida. Thousands attend. It is mostly an older crowd with the youngsters about 40 years of age. I have been saying for years that until you have lost enough money trying to make a fortune you will not become serious about investing. The under 40’s are shooting for the moon and it has finally dawned on the over 40’s (maybe it’s the over 50’s) that they must find a better way to get rich.

        The Money Show presents a forum of recognized experts in their field. It may be long-term or short term trading. It could be in stocks, bonds, mutual fund, ETFs (Exchange Traded Funds), oil and gas properties, options, commodity futures, managed accounts and other more esoteric venues.

   Each one of the “experts” allows you to listen to him speak (at no charge) to tell you how he has found the secret to stock market success and why you should buy his Holy Grail service. You will receive his (daily, weekly, monthly) market letter for the ridiculously low price of from $250 to $5,000 or more. You may not have found the Holy Grail, but he has.

        Almost all of them have a “when to buy” method, but very few have a “when to cash in your chips” method and fewer than that will have any way to protect yourself from losing it all should their Holy Grail method turn into Holy Cow.

        The Orlando show occurs in February so every expert has his predictions for the coming year. The only bear I found was Martin Weiss, but he wasn’t a bull in 1999 either. No one wants to hear dire consequences of a bad year for their stocks so the audience is fed the kind of food they like. Everything is going to be even better this year and with my super software (or newsletter) you will make a better return than ever before.

        During the three day show there were 396 individual presentations most of which ran about an hour more or less and then there were the extra charges for having breakfast, lunch, tea, whatever with one of the speakers. And these weren’t cheap. You could also sign up for all day seminars. In the Exhibit Hall there was always an expert giving a lecture with a great slide show on how his Grail (I am getting hesitant about calling it Holy) will increase your portfolio.

        Many investors came to see the guru whose market letter they were receiving. Very few of these mavens are making anyone rich, but there are some. My question to them is are they putting their own money on the line or are these results hypothetical?

        After attending several of these seminars each day with each presenter showing his magic get-rich formula it would seem these folks would go home more confused than when they came. There is no Holy Grail of investing. At least I have not found it nor do I know anyone who has. Do not rely on someone else to make you rich.’ You have to do it yourself.

        The real Holy Grail translates into two words – Hard Work.

        Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method.  Read the first chapter at www.mutualfundmagic.com  and discover why he's the man that Wall Street does not want you to know.      

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2.0 Market Analysis

      Energy and Basic Materials remain the leading sectors.  Industry leadership in Table 1 below continues to take a short term view. 

      Table 1

 Market Summary

 Week ending 02/26/05:

 Major Indices:

 Dow Jones     +0.5%

 NASDAQ        +0.3%

 S&P500 Index  +0.8%

 Russell 2000  +1.2%

 30 Year Bond 4.64%

 10 Year Note 4.27%

 Industry Leaders

 For the Past Week

 Home Construction 

 Marine Transportation 

 Exploration & Production 

 Steel 

 Coal 

 Oil & Gas Producers 

 Integrated Oil & Gas 

 Oil & Gas 

 Nonferrous Metals 

 Mining 

 Industry Leaders

 For the Past Month

 Coal 

 Exploration & Production 

 Oil & Gas Producers 

 Integrated Oil & Gas 

 Oil & Gas 

 Steel 

 Marine Transportation 

 Heavy Construction 

 Commodity Chemicals 

 Pipelines 

 Gold for the past 30 days:

 USD    +1.85%

 CAD    +2.64%

 CHF    +0.45%

 GBP    +0.12%

 EUR    +0.85%

 JPY    +4.16%

      On Friday, the CRB commodity index hit its highest level in over 5 years.  The S&P index is now almost exactly unchanged for the year.  There is a tug of war between the positives of strong economic and earnings growth with increased acquisitions, and the negatives of rising interest rates and firming inflation.  On Friday, the fourth quarter GDP gain was revised upward from 3.1% to a 3.8% annual rate of increase.  Expectations are that real GDP will rise about 3 1/2% to 4% in the first half of this year. That is above long-term trends.  Steel, materials, and energy stocks had yet another good week. Banks, pharmaceuticals, and technology stocks are putting in mixed performances.  High valuation stocks have been losers this year, as reflected in the underperformance in the NASDAQ and the Russell 2000.

      The market enters March facing a warnings season period ahead of first quarter earnings reports.  The biggest question marks are on inflation and interest rates.  Next week, the earnings calendar is very light, with Costco on Wednesday the only report worth noting.  The economic calendar is dominated by the March employment release on Friday.

       The 5 day RSI for the DOW, S&P500 and the NASDAQ are all neutral as are the 5 day RSI for the S&P500 and the NASDAQ.  The 5 week RSI for the DOW is overbought.  Other sentiment indicators are given in Table 2.

Table 2

Sentiment Indicators 02/26/05

Sentiment Indicator	Value	Last Week	2 Weeks Ago	Complacent	Cautious
VIX	11.49	11.18	11.43	< 20	> 50
VXN	17.34	17.87	17.19	< 30	> 80
Put/Call Ratio	0.573	0.594	0.660	< 0.6	> 0.7
%Bulls - %Bears	32.7	35.4	31.4%	> 29%	< 25%

3.0 Procedure

      The following stock screens were generated with tools from AAII.  A new pair of columns was added to indicate how long an entry has been in a watch list and how the stock has performed since.  The short term trading filter used for Table 3a looks for optionable stocks whose percentage relative strength over the past 6 months is greater than 90%, EPS Growth over the past 12 months is greater than 80% and are within 5% of their 52 week  high  with  a  minimum  price  of  $50.   One exception is BHP, added just recently, that does not really fit the filter but is a promising basic materials play. When a trigger, price gap up or unusually high up volume occurs, call options are supplied. 

Key

Open Trade

Passed Recent Filter

"0"       = No discernable trend

"GAP" = Price gap

"V"      = Higher than average volume

"+T"    = Positive trend

"-T"     = Negative trend

"TT"    = Trigger received

"TTC" = Confirmation received

Table 3a

Short Term Options (Original Stock Candidate Filter) as of   02/26/05

Stock	Added	% Chg	Company	Sector	Industry	OPTION	Key
AAPL	01/10/05	29.0%	Apple Computer, Inc.	Technology	Computer Hardware	QAA GT JUL 100.00 CALL	+TV
AEOS	02/07/05	0.2%	American Eagle Outfitters	Services	Retail (Apparel)	AQU HK AUG 55.00 CALL	+TTC
AET	01/03/05	18.5%	Aetna Inc.	Financial	Insurance (Accident & Health)	-	+T
ATW	02/07/05	12.0%	Atwood Oceanics, Inc.	Energy	Oil Well Services & Equipment	-	+T
BHP	02/24/05	3.0%	BHP Billiton Limited (ADR)	Basic Materials	Metal Mining	BHP HF AUG 30.00 CALL	+GAPV
BTU	11/22/04	24.1%	Peabody Energy Corporation	Energy	Coal	BTU IT SEP 100.00 CALL	+TV
BYD	02/21/05	-0.7%	Boyd Gaming Corporation	Services	Casinos & Gaming	-	+T
CLF	12/20/04	50.3%	Cleveland-Cliffs Inc.	Basic Materials	Metal Mining	CLF GN JUL 70.00 CALL	+TV
CME	02/14/05	0.0%	Chicago Mercantile Exchange Holdings	Financial	Investment Services	-	0
CRS	02/14/05	4.8%	Carpenter Technology Corp	Basic Materials	Iron & Steel	CRS IN SEPT 70.00 CALL	+TV
FFIV	02/14/05	0.6%	F5 Networks Inc.	Technology	Computer Networks	-	+T
GGC	02/21/05	5.0%	Georgia Gulf Corporation	Basic Materials	Chemicals - Plastics and Rubbers	-	0
GMR	02/25/05	0.0%	General Maritime Corp.	Transportation	Water Transportation	GMR HK AUG 55.00 CALL	+TTC
KMRT	11/29/04	-5.2%	Kmart Holding Corporation	Services	Retail (Department & Discount)	-	0
MDC	02/14/05	4.8%	M.D.C. Holdings, Inc.	Capital Goods	Construction Services	MDC IQ SEP 80.00 CALL	+TTC
MGG	12/27/04	6.8%	MGM MIRAGE	Services	Casinos & Gaming		0
MON	12/20/04	12.7%	Monsanto Company	Basic Materials	Chemical Manufacturing	-	0
PCO	02/14/05	6.0%	Premcor Inc.	Energy	Oil & Gas Operations	-	+T
POT	12/20/04	11.2%	Potash Corp./Saskatchewan (USA)	Basic Materials	Non-Metallic Mining	-	+T
SIE	02/14/05	6.4%	Sierra Health Services, Inc.	Financial	Insurance (Accident & Health)	-	+T
SWN	11/22/04	22.5%	Southwestern Energy Company	Energy	Oil & Gas Operations	-	+T
TXI	12/20/04	9.7%	Texas Industries, Inc.	Capital Goods	Construction - Raw Materials	TXI DN APR 70.00 CALL	+TV
TXU	11/22/04	21.1%	TXU Corporation	Utilities	Electric Utilities	TXU GP JUL 80.00 CALL	+TTC
VLO	02/07/05	25.0%	Valero Energy Corp.	Energy	Oil & Gas Operations	VLO IN SEP 70.00 CALL	+TV
X	12/20/04	21.4%	United States Steel Corp.	Basic Materials	Iron & Steel	X JM OCT 65.00 CALL	+TV

      The stock filter resulting in Table 3b is for the potential to write covered call options.  The only difference between filters for Tables 3a and 3b is that in 3b the maximum stock price is $20. The percent relative strength for PNK is falling slightly below 80% and it was removed.

Table 3b

Short Term Covered Call Writing Screen as of   02/26/05

Stock	Added	% Chg	Company	Sector	Industry	Covered Calls	Key
AES	02/24/05	2.0%	The AES Corporation	Utilities	Electric Utilities	-	+TV
AKS	12/20/04	19.6%	AK Steel Holding Corporation	Basic Materials	Iron & Steel	-	+T
BEV	02/14/05	0.0%	Beverly Enterprises	Health Care	Healthcare Facilities	BEV CV MAR 12.50 CALL	+TTC
GLBL	02/24/05	3.4%	Global Industries, Ltd.	Energy	Oil Well Services & Equipment		+TV
MDRX	02/07/05	22.0%	Allscripts Healthcare Solutions, Inc.	Technology	Software & Programming	MXQ CC MAR 15.00 CALL	+TTC
MXT	12/20/04	-5.5%	Metris Companies Inc.	Financial	Consumer Financial Services	-	0
OS	12/20/04	40.1%	Oregon Steel Mills, Inc.	Basic Materials	Iron & Steel	OS CF MAR 30.00 CALL	+TV
SGR	02/07/05	17.1%	The Shaw Group Inc.	Basic Materials	Misc. Fabricated Products	-	+T
SID	12/20/04	39.4%	Companhia Siderurgica Nacional (ADR)	Basic Materials	Iron & Steel	SID CF MAR 30.00 CALL	+TV
SIGM	02/14/05	3.0%	Sigma Designs, Inc.	Technology	Computer Peripherals	MQN CV MAR 12.50 CALL	+TV
TIWI	02/14/05	-4.9%	Telesystem International Wireless (USA)	Services	Communications Services	TAU CC MAR 15.00 CALL	+TT
WITS	02/14/05	-2.7%	Witness Systems, Inc.	Technology	Software & Programming	UPJ CD MAR 20.00 CALL	+TTC
XXIA	01/02/05	14.3%	Ixia	Technology	Electronic Instruments & Controls	UJC CD MAR 20.00 CALL	+TV

      For the screen in Table 3c, the number of selections is reduced by eliminating stocks having P/E’s greater than 30.  Relative strengths of BSTE, ODFL and PHM are on the low side.

Table 3c

Growth Momentum (Intermediate Term) Screen as of   02/26/05

Stock	Added	% Chg	Company	Sector	Industry	Leaps
BSTE	01/31/05	1.2%	Biosite Incorporated	Health Care	Biotechnology & Drugs	VYL AL JAN07 60.00 CALL
ELBO	12/13/04	-1.5%	Electronics Boutique Holdings Corp.	Services	Retail (Technology)	-
ELK	02/24/05	3.0%	ElkCorp	Capital Goods	Construction - Supplies and Fixtures	-
KBH	01/10/05	22.7%	KB Home	Capital Goods	Construction Services	OHK AX JAN07 130.00 CALL
MT	02/24/05	#######	Mittal Steel Company N.V. (ADR)	Basic Materials	Iron & Steel	-
MTH	12/13/04	42.1%	Meritage Homes Corporation	Capital Goods	Construction Services	-
ODFL	02/07/05	-4.9%	Old Dominion Freight Line	Transportation	Trucking	-
PHM	02/07/05	12.3%	Pulte Homes, Inc.	Capital Goods	Construction Services	OPN AN JAN07 70.00 CALL
PTRY	02/07/05	3.9%	The Pantry, Inc.	Services	Retail (Grocery)	-
SPF	02/14/05	10.6%	Standard Pacific Corp.	Capital Goods	Construction Services	-
USNA	02/21/05	5.9%	USANA Health Sciences, Inc.	Consumer Non-Cyclical	Personal & Household Products	-
VIVO	12/20/04	-12.1%	Meridian Bioscience, Inc.	Health Care	Biotechnology & Drugs	-

      For the Peter Lynch screen in Table 3d, again the number of selections for this screen is reduced by eliminating stocks having P/E’s greater than 30.   GGB’s EPS growth is near zero.

Table 3d

Peter Lynch Value (Intermediate Term) Screen as of   02/26/05

Stock	Added	% Chg	Company	Sector	Industry	Leaps
BLSC	12/13/04	1.9%	Bio-Logic Systems Corp.	Health Care	Medical Equipment & Supplies	-
CAJ	01/31/05	0.2%	Canon Inc. (ADR)	Technology	Computer Peripherals	-
CSLMF	12/13/04	-2.1%	Consolidated Mercantile (USA)	Basic Materials	Containters & Packaging	-
GGB	02/14/05	12.2%	Gerdau S.A. (ADR)	Basic Materials	Iron & Steel	-
IMY	02/21/05	-3.6%	Grupo IMSA S.A. de C.V. (ADR)	Basic Materials	Iron & Steel	-
KEP	12/13/04	5.6%	Korea Electric Power Corporation (ADR)	Utilities	Electric Utilities	-
MBT	01/10/05	16.1%	Mobile TeleSystems OJSC (ADR)	Services	Communications Services	OVD AI JAN07 45.00 CALL
MKTAY	02/07/05	4.2%	Makita Corporation (ADR)	Consumer Cyclical	Appliances & Tools	-
NOLD	12/13/04	11.1%	Noland Company	Capital Goods	Misc. Capital Goods	-
PCU	12/13/04	30.3%	Southern Peru Copper Corp (USA)	Basic Materials	Metal Mining	-
SHI	12/13/04	27.3%	Sinopec Shanghai Petrochemical Co. (ADR)	Energy	Oil & Gas Operations	-
SKM	02/07/05	5.7%	SK Telecom Co., Ltd. (ADR)	Services	Communications Services	-
TM	12/13/04	3.5%	Toyota Motor Corporation (ADR)	Consumer Cyclical	Auto & Truck Manufacturers	-
TMIC	02/21/05	2.7%	Trend Micro Incorporated (ADR)	Technology	Software & Programming	-
UGP	12/13/04	-10.5%	Ultrapar Participacoes SA (ADR)	Energy	Oil & Gas Operations	-
VLCCF	12/13/04	14.2%	Knightsbridge Tankers Limited	Transportation	Water Transportation	-

      The stocks from Benjamin Graham’s style of utility investing are listed in Table 3e.  A requirement was added to include only those stocks having a PE of 17 or less.  

Table 3e

Benjamin Graham Value (Long Term) Screen as of   02/26/05

Stock	Added	% Chg	Company	Sector	Industry	Leaps
BKH	02/14/05	-0.5%	Black Hills Corporation	Utilities	Electric Utilities	-
DTE	01/10/05	2.0%	DTE Energy Company	Utilities	Electric Utilities	-
KEP	01/10/05	14.0%	Korea Electric Power Corporation (ADR)	Utilities	Electric Utilities	-
NFG	01/10/05	5.3%	National Fuel Gas Co.	Utilities	Natural Gas Utilities	-
PGN	01/10/05	-1.5%	Progress Energy, Inc.	Utilities	Electric Utilities	OPM AJ JAN07 50.00 CALL
PNM	01/10/05	8.9%	PNM Resources, Inc.	Utilities	Electric Utilities	-
PNW	01/10/05	-2.5%	Pinnacle West Capital	Utilities	Electric Utilities	-
SRE	01/10/05	9.7%	Sempra Energy	Utilities	Natural Gas Utilities	-
WPS	02/07/05	3.0%	WPS Resources Corp	Utilities	Electric Utilities	-

      The filter for Warren Buffet style stock picking in Table 3f is for the intermediate to long term.  Two requirements were added.  One was to include only optionable stocks in order to find LEAPS opportunities.  The other requirement was to include only those stocks having a PE of 17 or less.  Earnings growth for FNF, FDP and NFB had low EPS growth and were deleted.  THO should be reporting soon.  HELE, although passing this week’s screen, was removed due to price underperformance.  If it continues to pass the screen, it will be restored to the list.

Table 3f

Warren Buffett Value (Long Term) Screen as of   02/26/05

Stock	Added	% Chg	Company	Sector	Industry	Leaps
ABFS	02/07/05	1.3%	Arkansas Best Corporation	Transportation	Trucking	-
COLM	01/10/05	1.1%	Columbia Sportswear Company	Consumer Cyclical	Apparel/Accessories	-
DHI	12/27/04	15.0%	D.R. Horton Inc.	Capital Goods	Construction Services	VEI AH JAN07 40.00 CALL
DSPG	02/07/05	-0.9%	DSP Group, Inc.	Technology	Communications Equipment	-
ELBO	01/31/05	7.2%	Electronics Boutique Holdings Corp.	Services	Retail (Technology)	-
HOV	12/27/04	20.1%	Hovnanian Enterprises	Capital Goods	Construction Services	OZW AL JAN07 60.00 CALL
HRH	12/27/04	-3.2%	Hilb, Rogal & Hobbs Company	Financial	Insurance (Miscellaneous)	-
LNCR	12/27/04	-3.0%	Lincare Holdings Inc.	Health Care	Healthcare Facilities	OUN AI JAN07 45.00 CALL
NUE	02/25/05	0.0%	Nucor Corporation	Basic Materials	Iron & Steel	VUB AO JAN07 75.00 CALL
PGR	12/27/04	4.1%	The Progressive Corp.	Financial	Insurance (Property & Casualty)	-
RS	02/24/05	4.1%	Reliance Steel & Aluminum	Basic Materials	Misc. Fabricated Products	-
STLD	02/07/05	17.2%	Steel Dynamics, Inc.	Basic Materials	Iron & Steel	VJM AJ JAN07 50.00 CALL
SU	01/31/05	23.5%	Suncor Energy Inc. (USA)	Energy	Oil & Gas - Integrated	OYX AH JAN07 40.00 CALL
THO	01/10/05	2.9%	Thor Industries, Inc.	Capital Goods	Mobile Homes & RVs	-
VLCCF	02/21/05	1.5%	Knightsbridge Tankers Limited	Transportation	Water Transportation	-

4.0 Results

4.1 Filter Tracking

      The goal for filter tracking is to observe the use of stock candidate filters to buy call options and write covered calls in rising and sideways markets and the down-market filter for use in buying put options in declining and sideways markets.  Essential features of the 3 filters are described in Table 4a.

Table 4a

Filter Criteria

Description	(1) Stock Candidate	(2) Stock Candidate	(3) 2^nd Down-mkt
Purpose	Buy Calls & Puts	Write Covered Calls	Buy Put Options
Market direction	All	All	Down, Sideways
Price	> $50	< $20	> $30
12 m EPS growth	> 80%	> 80%	< 20%
Relative Strength	26 wk >90%	26 wk >90%	26 wk < 20%
Price within	5% of 52wk high	5% of 52wk high	5% of 52 wk low
Exchanges	NASDAQ, NYSE	NASDAQ, NYSE	NASDAQ, NYSE

      The relative average filter performance for the three groups of filtered stocks is compared with proxies for the major averages in Table 4b.  Filter 1 stocks are those listed in Table 3a and filter 2 stocks are listed in table 3b.  Filter 3 stocks, for the experimental filter, are listed in Table 4c.  Filter 3 stocks remain consistently lower than those for the Filters 1 and 2.  

Table 4b

Average Filter Performance as of 02/26/05

Instrument	Past month	1 Week ago	2 weeks ago	3 weeks ago	4 weeks ago
SPY	3.4%	0.9%	-0.3%	0.4%	2.4%
DIA	3.8%	0.5%	-0.3%	1.0%	2.5%
QQQQ	1.9%	0.7%	-0.9%	-0.1%	2.2%
Filter 1 > $50	15.9%	3.9%	2.6%	2.0%	6.6%
Filter 2 < $20	18.8%	3.2%	4.9%	1.0%	8.4%
Filter 3 > $30	-0.7%	0.5%	-0.8%	-1.2%	0.9%

      Stocks selected by the down-market filter are listed in Table 4c.  This filter looks for stocks having the potential to decline in a down market.  They are optionable stocks priced above $30 having less than 20% year over year EPS growth, a 26 week %Rank Relative Strength of less than 20% and are within 5% of their 52 week lows. 

Table 4c

Experimental Down-Market Filter as of   02/26/05

Stock	Added	% Chg	Company	Sector	Industry	OPTION	Key
BUD	02/21/05	-0.1%	Anheuser-Busch Companies, Inc.	Consumer Non-Cyclical	Beverages (Alcoholic)	-	-T
ETM	02/07/05	0.9%	Entercom Communications Corp.	Services	Broadcasting & Cable TV	-	0
FITB	02/21/05	-1.4%	Fifth Third Bancorp	Financial	Regional Banks	-	0
GM	02/07/05	1.6%	General Motors Corporation	Consumer Cyclical	Auto & Truck Manufacturers	-	-T
IP	02/21/05	1.0%	International Paper Company	Basic Materials	Paper & Paper Products	IP SG JUL 35.00 PUT	-T
MIL	02/07/05	0.4%	Millipore Corporation	Technology	Scientific & Technical Instruments	MIL SI JUL 45.00 PUT	-TT
MTG	02/21/05	1.6%	MGIC Investment Corp.	Financial	Insurance (Property & Casualty)	MTG UL SEP 60.00 PUT	-TTC
NBIX	02/21/05	-1.1%	Neurocrine Biosciences, Inc.	Health Care	Biotechnology & Drugs	-	-T
NYT	02/21/05	-2.8%	The New York Times Co.	Services	Printing & Publishing	NYT SH JUL 40.00 PUT	-T
SSP	02/07/05	0.4%	The E.W. Scripps Company	Services	Printing & Publishing	SSP RI JUN 45.00 PUT	-T
TECH	02/07/05	0.0%	Techne Corporation	Health Care	Biotechnology & Drugs	-	-T

4.2 Portfolio Trade History

VLO was an option alert.  BHP and TXU were traded from the Options watch list. 

Table 4d

Option Portfolio Trading History as of 02/26/05
 

Stock	Buy Date	Buy Price	Last	Action	P/L(%)	Option
URBN	11/23	11.50	$9.00	Sold 11/30	-21.7%	JUN 35.00 CALL
TXU	11/23	11.30	$6.30	Sold 12/2	-44.2%	APR 55.00 CALL
USG	11/23	8.40	$12.80	Sold 12/15	52.4%	MAY 25.00 CALL
ADSK	12/20	8.20	$9.20	Sold 12/23	12.2%	ADQ GN JUL 70.00 CALL
MON	12/20	3.80	$4.80	Sold 12/23	26.3%	MON GJ JUL 50.00 CALL
POT	12/20	7.00	$8.00	Sold 12/23	14.3%	POT FP JUN 80.00 CALL
TXI	12/20	5.50	$9.00	Sold 12/23	63.6%	TXI GL JUL 60.00 CALL
AET	1/7	5.70	$7.10	Sold 01/19	24.6%	AET GX JUL 135.00 CALL
CLF	1/7	7.30	$9.20	Sold 01/19	26.0%	CLF GJ JUL 50.00 CALL
MTH	1/21	6.80	$9.20	Sold 02/01	35.3%	MTH FZ JUN 62.50 CALL
BZH	1/31	13.70	$17.30	Sold 02/01	26.3%	BZH HJ AUG 150.00 CALL
KBH	1/31	9.20	$11.10	Sold 02/01	20.7%	KBH GU JUL 110.00 CALL
BHP	1/28	2.25	$2.70	Sold 02/01	20.0%	BHP HE AUG 25.00 CALL
X	1/25	5.30	$4.90	Sold 02/02	-7.5%	X GK JUL 55.00 CALL
SFI	1/24	0.75	$0.30	Sold 02/04	-60.0%	SFI PH APR 40.00 PUT
EBAY	2/7	6.80	$5.60	Sold 02/08	-17.6%	XBA SO JUL 75.00 PUT
CCJ	2/4	6.60	$10.20	Sold 02/11	54.5%	CCJ IG SEP 35.00 CALL
MON	2/4	8.00	$8.20	Sold  02/15	2.5%	MON GJ JUL 50.00 CALL
TOL	1/2	7.10	$7.30	Sold 02/17	2.8%	TOL IR SEP 90.00 CALL
BZH	2/9	14.60	$16.90	Sold 02/17	15.8%	BZH HN AUG 170.00 CALL
KBH	2/7	11.10	$10.40	Sold 02/18	-6.3%	KBH GC JUL 115.00 CALL
VLO	2/24	6.98	$10.70	Long	53.3%	VLO IN SEP 70.00 CALL
BHP	2/24	2.25	$2.60	Long	15.6%	BHP HF AUG 30.00 CALL
TXU	2/25	3.10	$4.10	Long	32.3%	TXU GP JUL 80.00 CALL

5.0 Conclusion

      According to the portfolio trading history, trading system performance parameters remain stable.  The number of trades needed to earn an amount equal to the average trade size is 7.

      Average fractional profit for 24 trades, F_P = 14.2% per trade.

      Fraction of trades chosen in the correct direction, F_C = 75.0%

      Average fractional gain for 18 winning trades, F_G = 27.69% per trade.

      Average fractional loss for 6 losing trades, F_L = -26.25% per trade.

Appendix

Investment Conference Schedule

     Some of the finest investment ideas can be introduced and catch fire at conferences.  Below are links to conference registration sites where you can sign up.  

• 03-09-05 Delray Beach, FL "Investment University"

• 03-17-05 San Jose , CA "INSEAD Presents Growth Ventures in Emerging Markets: Seizing the Opportunity"

• 03-20-05 San Jose , CA "6th Annual Mid-Market March Madness - M&A & Buyouts"

• 04-10-05 Calgary, Alberta "Calgary Resource Investment Conference"

• 04-10-05 Calgary, Alberta "Calgary Resource Investment Conference"

• 05-02-05 Chicago, IL "2005 Healthcare M&A & Corporate Development"

• 05-03-05 Acapulco, Mexico "SRI Conference on Foreign Investment Opportunities in Mexico's New Consumer and Small Business Lending Industry "

• 05-04-05 Atlanta, GA "Global Debt Collection Summit"

• 05-11-05 Minneapolis , MN "Medtech Investing Conference (4th Annual)"

• 05-11-05 New York, NY " IIR's Inaugural Forum on IP Rights Protection in Financial Services - Strategies for Building Patent Portfolios and Managing IP Risk "

• 05-17-05 London, United Kingdom "Corporate Venturing & Spinouts Conference "

• 05-17-05 New York, NY "Hedge Funds Regulation and Compliance 2005 - Gain Advanced Operational, Legal and Accounting Strategies to Achieve full Compliance in Today's Regulatory Environment "

• 05-23-05 New York, NY -Both professional and sophisticated private investors meet with the world's leaders in gold, silver, precious metals, copper and oil and gas exploration and production "New York Institutional Gold Conference"

• 06-01-05 San Francisco, CA "Venture Capital Investing Conference"

• 06-12-05 Vancouver, BC "World Gold, PGM & Diamond Investment Conference" Resource Investment Conferences featuring small cap opportunities in gold, diamonds, oil & gas, industrial and emerging growth situations are being presented in Canada. Pre-registration is complimentary to: investors who are clients of sponsoring firms which include discount and full service brokerage houses; subscribers of participating newsletters, sponsoring media and sponsoring internet investment services; shareholders of participating exhibitors; accredited investment advisors and investors who take an interest in managing their own personal portfolios.

• 09-07-05 Las Vegas, Nevada "Gold and Precious Metals Investment Conference" The gold and metal resource market has demonstrated its strength and longevity, achieving sustained growth and multi-decade highs in the last year. Explore the shining prospects of gold, silver, copper, uranium and other fast-rising commodities. Realize your full potential in this sustained bull market, with Natural Resources the clear profit leaders.

• 09-29-05 Las Vegas, Nevada  "Tradestation World Users Conference" Trade Station World Conference and Expo, the premier conference for TradeStation users, is coming to the Venetian Hotel in Las Vegas, September 29 - October 2, 2005. Here's where you learn about how to design your personal trading strategies, and to test those strategies against historical data.

• 10-02-05 Toronto, Ontario "Toronto Resource Investment Conference"

• 10-30-05 New Orleans, LA "New Orleans Investment Conference"

• 11-10-05 Millbrae, CA "Biotech Investing Conference" Continuing advances in genomics, proteomics and enabling technologies makes the Biotech sector a favorite among private equity investors and venture capitalists. The Biotech Investing Conference is an industry gathering of the leading private equity investors, venture capitalists, biotech companies, pharmaceutical companies, corporate investors and institutional investors. 

• 11-27-05 San Francisco, CA "Gold and Precious Metals Conference"
  Both professional and sophisticated private investors meet with the world's leaders in gold, silver, precious metals, copper and oil and gas exploration and production. The Natural Resource industry's newest opportunities are presented, together with educational seminars, executive panels and investment workshops led by top finance specialists, economic analysts and newsletter editors. Admission is complimentary with pre-registration.

Conference Search

• By Date, Category, Country and Organizer
  

• By Topic and Region
  

• Financial reporting and corporate news - "Corporate News Announcements"