Prime Stock Advisory Letter for January 8th, 1999

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 rallied late yesterday to finish the day essentially unchanged.  There was strength in the high tech,  transportation, and financial indices.  With minor profit taking in the healthcare related indices.  The Internet continues to be the hot spot of the market.  From a technical perspective the market continues to look positive.  From a fundamental standpoint the market continues to look overvalued.  But right now it doesn't seem that fundamentals matter,  and they probably won't until something goes wrong.  The Bottom Line:  The market should move higher.

Recommendation 

Company: Compaq Computer Corp.     Symbol: 'CPQ'         Closing Price: $44.56/share.
YH: $45.75        YL: $22.94      EPS: ($1.78)     P/E: N/A       Forecasted EPS: $2.23
Dividend: $0.08       Yield: 0.17%        Ex Dividend: 12/29/98
Price Targets: $46.94 & $52.94        Downside Stop: $41.375
Options Recommendation: January 40 Calls,  Symbol 'CPQAH' @ $4.75/contract.

Company Description: This company is the leading producer of personal computers.

Recent News:  1/7  Lower PC prices drove US sales for Holiday month
1/5  Compaq launches PC's for home networking

Our Analysis: Compaq Computer is a component of the Morgan Stanley High Tech Index 'MSH,  the CBOE Technology Index 'TXX',  and the Amex Computer Technology Index 'XCI'.  I have rated all three of these indices as moving higher from their current levels.  The shares of 'CPQ' set a new closing high yesterday.  In the process they completed a small cup pattern with a measured move to $46.94/share.  Prior to this they had completed a larger longer term cup pattern with a measured move to $52.94/share. 


The Sterling Investment series of newsletters is produced by Sterling Investment Services, Inc.  If you would like to receive a chart on any index or stock mentioned in this report please contact us at the below mentioned numbers.  We also offer custom research reports on any stock investment that you may desire information on.  To receive further information on these services please visit our web page at:  www.sterlinginvestments.com   If you would like to contact us our # is 800-275-6901,  fax # (404)-816-8830  Email address is: enelson@sterlinginvestments.com  Sterling Investment Services may hold positions in the securities recommended or may be providing consulting services to the companies mentioned within this report.

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