"Make better out of bad."

-- Christina Nikolov

Name/Ticker: ASML Holding N.V. (ASML)

Date: January 2, 2003

Opinion: Bearish

Current Price: $8.90

Target Price(s): $5.87

Commentary:

Over the past three months, Wall Street's prognosticators slashed their 2003 earnings estimates for ASML Holding (ASML) by 53.7%. Regardless, the shares are now 35.9% higher than they were three months ago and tout a p/e multiple of 46 based on fiscal 2003 projections.

The technical picture doesn't look any better. On December 2nd, ASML sat 145% above its October 7th low, but that level failed to hold. The shares quickly relinquished 25% of its market value, pushing it back below critical support at $10. Going back as far as May 1997, there were five instances when the shares reversed course as they were confronted by $10. (Chart #3) The $10 to $11.50 zone appears to be critical, since it's made up of three resistance levels- $9.66, $10.25 and $10.93. Adding to the significance of the above-mentioned price range are downside gaps created in early December 2002 at $10.93 and $11.50. (Chart #1)

Since ASML is not currently overbought on a daily or weekly basis, there could be a little more strength left in the shares before they finally turn lower. Considering the negative fundamental and technical pictures, this stock will have a very difficult time surmounting the region between $10 and $11.50. Eventually, ASML could decline to $5.87 and possibly revisit the October 2002 low near $5.

To profit from the anticipated decline, we suggest the April 12.50 put (Symbol: MFQPV), which is currently offered at $4.10. If the stock challenges the upper end of the region mentioned above, you might be able to purchase this option for around $3 or $3.25.



Chart(s):

#1) ASML Holding N.V. (ASML) Two Month Daily Chart

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#2) ASML Holding N.V. (ASML) Ten Month Daily Chart

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#3) ASML Holding N.V. (ASML) Six Year Weekly Chart

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