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1:00pm (EST)
The bulls are making another push higher and have cracked the first layer of resistance as we head into the second half of trading. We mentioned this morning inside our Members Area that the current choppy action could continue for a few weeks if the market followed last year’s pattern but things are different this year.
Of course, betting on history does not mean the market will follow typical trading patterns but we have been in somewhat of a trading range all year as the market is trading near its February lows. This week’s news and upcoming earnings should provide enough volatility that a trend will emerge over the next week or two.
The European Union summit, jobless claims, earnings warnings, and upcoming earnings which start the week after next, could influence direction that could sway the Dow 1,000 points over the next 3 weeks. If you think June volatility has been whacky, wait until July and August roll around.
Arena Pharmaceuticals (ARNA, $8.73, down $0.12) was still trading as we were getting ready to go to press but shares were halted at 12:40pm. We have been following this story for years and today will be a big payday for our subscribers. We recommended backing the truck up when shares were at $2 in February and we have already locked-in triple-digit profits as shares have zoomed in recent weeks.
Much or our risk has already been taken off the table so the news won’t affect us either way as we have closed ¾ of the trade for our Daily. An approval for the company’s obesity drug, Lorcaserin, should push shares back above double-digits while a delay or rejection would probably hammer shares below $5.
If the stocks fall to $5 our call options should still yield a profit of at least 339%. If the stock moves past $10-$12, we should have a profit of nearly 500%. For our Weekly Wrap, our gains are capped at 117% as long as the stock $3 holds. We recommended buying Arena when shares were at $1.88 on February 2nd and for every 100 shares you purchased to sell the July 3 calls for 50 cents. This lowered the cost basis to $1.33.
Either way, we can’t complain but we would like to see the drug come to market so we can maximize our gains. We have taken steps to control risk so all we have to do is sit back and wait for the news.
We have also closed 2 more winning trades today that retuned our subscribers 43% and 33% in less than a week. Although the market is whipsawing us on a few of our positions, we have been prepared for the choppy action as we wait for a clear trend to develop.
As far as the market, the Dow is up 90 points to 12,625 while the S&P 500 is higher by 12 points to 1,332. The Nasdaq is getting a nice pop today and is showing a gain of 24 points and was last seen at 2,878.
We were going to send out a News Flash once we got word on Arena and we just did as we were typing our last sentence. Their obesity drug won approval!
As usual, we have a lot more action to cover inside our Members Area so let’s get to it!
Bears Show Teeth, Bulls Bite Back
Friday, May 11th, 2012
12:55pm
Wall Street notes…
We were like a kid on Christmas as futures were showing a triple-digit loss for the blue-chips when we hit the rack. We knew when we woke up one of our presents would be a biotech trade that could triple at the open. We got a bonus package after the close on Thursday which felt like Christmas Eve with JPMorgan’s (JPM, $37.71, down $3.03) debacle which will only weigh on the market going forward.
It has been a super sweet day as we have banked our 23-straight winning trade since late March. Needless to say, we are on a roll.
Of course, we have been telling everybody and anybody that would listen to us that 2012 would be an incredible year to trade options and we continue to feel that way. The current volatile environment is when we are at our best and we expect the chaos to continue.
Again, if you have never played the market to the downside, or traded in this type of environment, then you are truly missing out and some of the BEST profits you will ever see.
Since March, our subscribers have made 492% in 3 weeks on American Express (AXP, $59.94, up $0.52) call options; 292% in a week on Capital One (COF, $54.39, up $0.08) call options; 180% in 16 days on Deckers Outdoor (DECK, $53.13, up $1.35); and 576% in a little over 2 weeks on a Green Mountain Coffee Roasters (GMCR, $25.63, down $0.46) put option trade.
If you feel like you may have missed out on these trades, don’t. We have a current recommendation that is up 20%, the options are at a little over a buck, and we feel they could reach $7 for a 600% return. The options are on a stock that is in the lows $30’s but we feel shares could drop below $20 by mid-August. You can get into this trade right now.
That is all we have for today and we need to wrap things up as it has been a long, great week. We want to spend the last few hours just watching the market with a cold soda as we look forward to a relaxed weekend. There may be panic on Wall Street and we are sure there is a Duke brother or two out there feeling the pinch.
We feel like Billy Ray and Louis Winthrope right about now.
The Dow is up 35 points to 12,890 while the S&P 500 is higher by 4 points to 1,362. The Nasdaq is higher by 20 ticks to 2,954.
We have added 2 more NEW TRADES to our portfolio today. One at the open and our limit price was triggered shortly after lunch on the other. We were going to wait to go to press for another hour but we wanted to do the Daily update now to make sure everyone is filled and got into the trades.
BTW, our Arena Pharmaceuticals (ARNA, $6.10, up $2.44) call option trade is showing a 225% return with the stock up 70%. See the power of options?
We will be back Sunday night with the Weekly Wrap and on Monday morning with the next issue of the Daily. Make sure you are with us. Until then, have a great weekend everyone!
Tags: ARNA call options
Posted in BioTech, Hot Stocks, Market Analysis, Market Commentary, Option Trades | Comments Off