9:05am (EST)
The market struggled for much of Thursday after a weaker open and briefly made it into positive territory a few times as the bears tried to keep their fingers in the dike. However, by the final hour of trading, the bulls flooded the market with buy orders and the bears ran for the hills.
The Dow managed to pull out a 44 point gain to close at 10,611, its highest level since January 20th. The 2010 high for the index is 10,767 and if we don’t get there today, it sure looks like we will next week.
We have also been talking about the 1,150 level for the S&P 500 and that is exactly where the index closed with its 4 point gain. This level was hit twice at the beginning of the year and was a good sign that the bulls are serious on taking the market higher.
The real deal has been the Nasdaq which set a fresh 52-week high by adding 10 points to close at 2,368. We recently raised our target for the Nasdaq to 2,400 but we may have to raise that again if the Dow and S&P can break through 10,800 and 1,175. If so, then we have mentioned that the Dow could run to 11,000 while the S&P could move towards 1,200 if those two indexes can keep up with Tech.
On Tuesday, we told you about Amylin Pharmaceuticals’ (AMLN, $21.19, up $0.29) big day today and it looks like they could be popping champagne at headquarters. The FDA could approve its diabetes drug Byetta, for which it is partnered with Eli Lilly (LLY, $35.82, up $0.48), to produce.
This will be great news for Amylin if the drug is approved and will be a blockbuster as it should easily do $1 billion in sales, quickly. Byetta would be the first once-weekly treatment in the war against type 2 diabetes.
As you can imagine, there was a tremendous amount of action in the stock as well as the option pits. Over 12.6 million shares traded hands (3X normal volume) but there were plenty of big bets being placed on both sides of the ball.
The March 25 calls (AQM100320C00025000, $0.90, flat) were the flavor of choice for bullish traders as over 22,000 contracts traded hands. As far as the skeptics, they were hoarding the March 15 puts (AQM100320P00015000, $0.70, up $0.20) as volume came in at 25,000 contracts.
Most traders probably played the stock one way, betting for or against approval, but the two aforementioned options could have been used as a strangle option trade. We mention these types of trades from time-to-time but we stayed on the sidelines for this one. It is somewhat of a “chicken trade” or a “safety” play and can be used if you think a HUGE move is possible, either way.
We also mentioned we were watching Alkermes (ALKS, $12.64, up $0.08) which is a company that enables the slow delivery of the drug. No word yet but this breaking news will be hitting the market sometime today.
Retail sales came in better-than-expected and the futures, which were already up, got stronger. As we head to press, the Dow futures are up 36 points to 10,583 while the S&P futures are up 5 to 1,150. The Nasdaq 100 futures are also up 5 points and stand at 1,927.
Market Tight As Traders Look For Clues
Monday, February 22nd, 2010
1:10pm (EST)
The market opened slightly higher but was unable to hold its gains as the bulls and bears position themselves for this week’s battle. We have been in a tight trading range for much of the day but the sentiment is a little bearish after President Obama proposed a new Medicare tax on unearned income and $10 billion in additional fees on drug companies.
The bulls may be in a wait-and-see mood which could lead to some lackluster trading as they wait for more earnings reports this week.
Speaking of earnings, Campbell Soup (CPB, $33.33, down $0.60) reported numbers of $259 million, or $0.74 a share, versus $233 million, or $0.64 a share, in the year-earlier quarter. Sales rose 1% to $2.15 billion. Wall Street had forecast Campbell to earn $0.73 a share on sales of $2.2 billion. Although earnings rose 11% as the company’s margins improved, it continued to see weakness in U.S. soup sales and volume fell 2%.
We mentioned Dendreon (DNDN, $32.89, up $0.53) this morning after the stock was up in pre-market trading. JPMorgan (JPM, $40.71, up $0.68) came out with an ”Overweight” rating and a $46 price target on our favorite Drug stock. The call is based upon a belief that Provenge will be approved for advanced prostate cancer.
Many of you know we have been following this story for over two years and Dendreon was by far our biggest trade return last year as our subscribers rode the stock from $4 to the mid $20’s.
There are also higher “unofficial” price targets for Dendreon but the drug must get approval first before we say it’s headed past $50. However, we think shares can hit over $100 in the next two years if Provenge is approved but it will depend on how well the company handles the transition from small town Billy to big town Bobby as sales are expected to reach over $1 billion.
We also mentioned Dendreon on our Watch List last Wednesday in our Members Area and told our subscribers about the “triple-top” resistance that was at $30-$31 and to watch for a breakthrough. We also listed an option trade that is now up 50%. We were waiting for the February options to expire before making this an “official” recommendation but the train left us.
We are still looking at other trades for Dendreon but we don’t want to chase with the options we have already talked about. There will be another opportunity for us to buy some options and that may come this week or next month as we do feel an explosive move higher is forthcoming.
As we head to press, the Dow is down 6 points to 10,396. We have a lot of updates to cover in our Members Area so let’s get to it…
Tags: CPB, dndn, JPM, option picks, option signals, options alerts, stock options trading
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