Prime Stock Advisory Letter for December 8th, 1998

Position Statement: In our Prime Recommendation Letter we attempt to identify the recommendation with the highest probability of moving higher.  We recommend that stop orders be placed at the time of purchase,  and once the position has moved profitable we recommend a stop be placed a minimum of 3/8th above the purchase price and moved higher as the position moves higher.

Today's Comments:  The overall market moved slightly higher yesterday.  The rally was broad based and the majority of the sector indices I track moved higher.  As readers of this report are aware I have been of the opinion that the market would move lower.  The major market indices had rallied from their lows to set new highs.  In the process they had completed a "Cup Pattern",  which takes its name from that fact it looks like the silhouette of a cup.  This is normally a very highly reliable and predictable pattern.  Then the market pulled back and left me to believe we may have formed a "Double Top",  which is when the market encounters resistance and moves lower at roughly the same levels.  The current chart pattern of the S&P 500 and the OEX leads me to believe their is a possibility that a "Handle" pattern may be being formed.  (Hey,  I did not make these terms up,  they are actually well established technical analysis terms.)  This looks like a handle on the silhouette of a cup.  This is also a very bullish pattern for the market.  My concern over declaring that a "handle" pattern is being formed is that one of the oscillating technical indicators has yet to confirm this move.  My feelings are that the next few trading days will make the market picture a lot clearer.  As a result I am not going to recommend any index options today.  And to complicate the picture further,  this is "Triple Witching" options expiration week,  and many major institutions are unwinding complicate positions prior to the end of the year.  It won't kill us to sit on the sidelines today in terms of trading index options.
 

Company:   Advanced Micro Devices, Inc.        Symbol: 'AMD'        Closing Price: $31.50/share.
YH: $32.00     YL: $12.75      EPS: ($0.97)      P/E: N/A       Forecasted EPS: $0.97
Dividend: N/A        Yield:  N/A          Ex Dividend: N/A
Price Targets:  $43.44 & then $47.375        Downside Stop:  $28.875
Options Recommendation: January 30 Calls,  Symbol 'AMDAF' @ $3.75/contract.

Company Description: This company is a major producer of semiconductors used in personal computers.

Recent News:  12/07  AMD extends NAND Technology to code storage with 64-Megabit Flash
12/4  Brown Brothers Harriman raises 4th qtr estimates.

Our Analysis: The company is a component of the Philadelphia Semiconductor Index 'SOX',  the CBOE Technology Index 'TXX',  the Amex Computer Technology Index 'XCI'.  I have rated all three of these indices as moving higher from their current levels.  The shares of 'AMD' set a new yearly high yesterday.  In the process they completed a cup pattern with a measured move to $43.44/share.  If the shares close above that level then they should continue to move higher and test $47.375/share,  their closing high established in March of 1997.  Brown Bothers Harriman recently upped its 4th quarter earnings estimates for Advanced Micro Devices.

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