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By Mark Phillips
Trying to out-LEAP the 800 lb. Gorilla

CSCO - Cisco Systems $27.00

A year ago, you would have thought us insane if we had said you would get another chance to buy CSCO below $30, but that is precisely the scenario we have right now. Persistent market weakness, thanks to the rapid Fed-induced economic slowdown has dragged even this Tech bellwether down near 2-year lows. Of course, it didn't help that CSCO itself missed earnings earlier this month for the first time in several years. Throw in CEO John Chambers' strong statement last weekend that the US manufacturing sector is solidly in a recession, and it is no wonder buyers have continued to be swamped by sellers since the $45 support level was broken in early December. Even after the nearly 70% drop in price, CSCO has a lofty PE of 66, based on Friday's closing price of $27. So why is the stock featured as the spotlight play this weekend, instead of being moved to the ever-growing Drop list?

CSCO is arguably the best-managed technology company in existence, and despite the near-term weakness, we expect it to outperform the overall Technology market once rosier economic times return. Not only that, but it appears that most of the damage that can be done, has been. With that being said, we wouldn't be in a hurry to gobble up new positions at current levels. The late-day rally on Friday appears to be mainly short-covering as the bears didn't want to carry their positions into the weekend with the looming possibility of a surprise interest rate cut. That's right, as mentioned above, the primary catalyst for the rally seems to have been the optimistic (at least from where we sit) comments from Wayne Angell that we are about to receive another gift from Greenspan and Company. We don't expect the current rally to continue for long, and are looking for another pullback as our opportunity to add new positions. Although the $25 level provided support last week, it seems entirely possible that we could see a dip into the low $20's before the stock finds its ultimate bottom for the long (and likely slow) recovery.

Consider this an early advisory, that when we do get the dip into the low $20s it looks like a good time to open new long-term positions, provided that support near $22 isn't violated. Initiate new plays above $23 on a bounce from $22. If the tech-wreck continues to pressure CSCO below this support level, stand aside for the time being, as the next solid support doesn't appear until $17-18.

BUY LEAP JAN-2002 $30.00 WCY-AF at $5.75
BUY LEAP JAN-2003 $30.00 VYC-AF at $8.75