Prime Stock Advisory Letter for January 22nd, 1999

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Company:  America Online      Symbol: 'AOL'    Closing Price: $141.00/share.
YH: $167.00     YL: $22.75   EPS: $0.30     P/E: 470.00    Forecasted EPS: $0.86
Dividend: N/A        Yield:  N/A     Ex Dividend: N/A
Price Targets:  $136.625 & then $104.25       Upside Stop:  $144.875
Options Recommendation: None Available

Company Description: This company is the nation's largest Internet Service Provider

Recent News:   1/21 Several misc. stories about the Internet bubble bursting.

Our Analysis:  The shares of 'AOL' closed below a key support level yesterday.  They should continue to move lower and test $136.625/share,  the point from which they gapped higher in late December of last year.  If they close below that level then they should continue to move lower and test $104.25/share.  It appears that a dose of reality is finally coming into play concerning the valuation of the Internet companies.  My belief is that earnings do matter.  This combined with a healthy round of profit taking should create a good trading opportunity as the stock moves lower and fills some gaps in its chart.  Caution is advised when shorting this stock.  Definitely pay attention to the stop levels on this stock and quickly adjust your stops when you have an opportunity to do so.  Finally,  evan if I were to have a large profit in this short position I am most likely to cover it at the end of the day as to reduce my risk of unexpected events over the weekend.