"To earn is to trust."

-- Christina Nikolov

Name/Ticker: Alaska Air Group (ALK)

Date: January 2, 2003

Opinion: Bearish

Current Price: $22.08

Target Price(s): $19.62, then $14.60

Commentary:

Over the past three months, Wall Street's prognosticators lowered their 2003 earnings estimates for Alaska Air Group (ALK) by 31%. Regardless, the shares are now 28% higher than they were three months ago and currently tout a p/e multiple of 36 based on those fiscal 2003 earnings.

Our analysis indicates that there is some heavy overhead resistance between $23 and $24.30. The 200-day moving average almost perfectly coincides with the November 11th peak. (see chart #1) In addition, if you look at the past seven years, you will see numerous occasions when the shares reversed course near this level. (see chart #2)

We expect the shares to eventually undercut support at $19.62 and fall to an upside gap created on November 11, 2002 at $14.60.

To profit from a decline, we like the April 25 put (Symbol: ALKPE) or the July 25 put (Symbol: ALKSE). These options are offered at $3.70 and $4.60 respectively..



Chart(s):

#1) Alaska Air Group (ALK) Seven Year Weekly Chart

Click the Chart for an Enlarged View

#2) Alaska Air Group (ALK) Five Month Daily Chart

Click the Chart for an Enlarged View