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9:05am (EST)
The market struggled to hold its early gains on Monday and finished mixed after the bulls lost their enthusiasm.
The bulls were able to squeeze a fraction of a point for the Dow as it finished at 11,205 after trading as high as 11,258. If it weren’t for Caterpillar’s (CAT, $71.65, up $2.87) powerful results, the Dow would have lost over 22 points which is how much the shares accounted for in the index yesterday.
The S&P 500 fell 5 points to finish at 1,212 but above 1,210 which had been short-term resistance. The index kissed a new 52-week high of 1,219 earlier on Monday and is still above its 10-day moving average.
The Nasdaq also finished lower as it slipped 7 points to settle at 2,522. The Tech-heavy index also hit a fresh intra-day high of 2,535 before it gave up its gains.
There were pockets of strength yesterday and one sector that continues to outperform are the Entertainment/ Movie stocks.
Imax (IMAX, $21.13, up $1.02) continues to amaze us and set another 52-week high. We have been on this company like grass on dirt when shares were at $3 a few years ago and when they broke $10 back in October we mentioned shares could run to $20+. Bingo.
Netflix (NFLX, $108.17, up $8.44) has also blown past our price target of $100 which we set back in November when the stock was in the$50’s and nobody else on Wall Street would touch it.
And what about Walt Disney (DIS, $37.04, up $0.25) which we’ve flirted with a few times by playing call options? That stock also set a new annual high yesterday.
This sector remains white-hot and we think there will be some M&A activity over the next few months that could take this sector even higher.
Turning our focus to the Financial stocks, Goldman Sachs (GS, $152.03, down $5.37) will take center stage today after being blamed for dumping 100’s of billions of dollars of toxic assets into everyone’s lap.
Testimony begins today that will bring Goldman’s CEO, Lloyd Blankfein, and other key executives before Congress. Somewhere Barney Frank is licking his chops. This is going to be great drama and we will probably tune-in to catch some of the action.
As we head to press, futures are pointing towards a slightly lower open. The Dow futures are off by 11 to 11,140 while the S&P 500 futures are down by 6 points to 1,202. Nasdaq 100 futures are off by 5 to 2,046. Subscribers, check the Members Area for the updates.
Lola, The Market Is Going Lower
Friday, May 14th, 2010
12:10pm (EST)
Ah, we are in a good mood today and the Kinks are kicking it in the background as we go to press…
Futures were pointing towards a lower open this morning and we had a good vibe that the recent put options we profiled were going to do well this morning. Sometimes the market can make you feel like you are in the matrix but when you can get the direction right, combined with the right option trades, it’s then you will know why we play this game.
The hardest part being an option trader is that you have to time a stock’s move just right. You can do all the fundamental research in the world (which we are good at and still works) to find the right candidates on which stocks are going to zoom or which companies are going to blow up.
Over the years we have mentioned “story stocks” such as Dendreon (DNDN, $44.31, down $1.09) when it was under $5 or Imax (IMAX, $19.14, down $0.27) at $3, or Netflix (NFLX, $102.55, down $7.46) when it was at double nickels ($55).
We also told you Bear Sterns would go belly up and that Fannie and Freddie Mac (FRE, $1.34, down $0.04) were accidents waiting to happen. We aren’t sure if our next “story stock” will double again but it has the potential.
To start, we aren’t stock investors but we have a ton of subscribers who use our research to buy stocks for their accounts. As option traders we “buy and hold” but often times we are in trades for three weeks or less on average. However, we can’t ignore some of the terrific returns that buying and holding a stock will do for your account.
Also, we actually profiled an option trade on this stock that lost 63% in less than a month because we didn’t time the move higher just right. The stock was at $9+ and we knew a move to $10 was in the cards but shares stalled for three weeks and we were forced out.
That is the BIGGEST difference between stocks and options.
Options are TIME SENSITIVE and you need shares to make a move by a certain amount of time. Meanwhile, owning a stock gives you the luxury of patiently waiting for the move higher or if you are “short”, a move lower.
In this case, owning the stock would have been more profitable than doing an option trade at the time. However, it doesn’t mean that we won’t try to trade options on it again…
From January 6, 2009 (quotes from that day):
“Orexigen Therapeutics (OREX, $5.89, down $0.10) was up sharply in after-hours trading on news that the company could be announcing something concerning its treatment drug for obesity, Contrave. The company will presenting at a JPMorgan (JPM, $29.25, down $2.10) conference next week which means the rumor mill got started early on what the company will say. The stock was up 20+%, or $1.30, to $7.20 in after-hours trading.
What surprises me is that it took until after the market closed for the stock to make a move as Wall Street seemed to ignore the fact that the company was awarded another patent for Contrave on Monday. It was the fourth patent for the drug which will provide protection until 2024.
Of course, Orexigen isn’t the only outfit trying to rush these new drugs to market. Vivus (VVUS, $5.37, down $0.12) and Arena Pharmaceuticals (ARNA, $4.22, down $0.03) are a couple of others. The race for the next generation of weight-loss drugs is on and all three companies are in phase 3 trials with results due this year. Orexigen appears to have the early lead in this race but there are always risks especially with biotech.” (END)
One year later…
From January 5th, 2010 (quotes from that day):
“Another stock we are watching for future profits down the road is Vivus (VVUS, $9.44, up $0.24).
The company has a potential blockbuster drug with Qnexa, a treatment for obesity that will be available in early 2010. The company said two late-stage clinical trials went well and asked regulators to approve its drug a week ago.
Vivus has some competition as other “diet’ pills are also expected to debut. Arena Pharmaceuticals (ARNA, $3.52, down $0.03) has also asked the FDA to take a look at their obesity drug, Lorcaserin, while Orexigen Therapeutics (OREX, $7.12, down $0.32) is pushing Contrave by the first half of 2010.
Vivus is the best bet to capture this lucrative market as Wall Street believes Qnexa could be the top go-getter based on the weight loss observed in clinical testing.
Arena’s weight loss drug is safer but Qnexa is also being used in Phase 2 trials to treat diabetes. Talk about two-for-the-money…imagine the cost savings of having the luxury to manufacture one drug to do two things.
It doesn’t stop there either. Vivus also has a drug, Avanafil, which is in phase 3 trials to treat erectile dysfunction and Luramist which is in phase 2 studies for the treatment of hypoactive sexual desire disorder in women.
The 52-week high for Vivus is $12.88 which was hit on September 10, 2009. We think the stock challenges this level again so file this one away. There will be a trade down the road”… (END)
Well we are at the fork, folks.
Vivus (VVUS, $11.85, down $0.43, current quote) has two dates that Wall Street is looking at. The first is July 15, 2010 which is when a division of the U.S. Food and Drug Administration (FDA), gives its thumbs up/down on the company’s NDA (New Drug Application).
If Vivus gets a check mark then the FDA could approve Qnexa in late October, 2010.
Again, we took a hit with the options which is on our 2010 Track Record and we aren’t sure if Vivus is ready for fame but this market is H-U-G-E. Pun intended.
We mention all of this because we are almost ready to teach you how to find your own stock and option trades. Yes, that is right.
We have finished with our Trading Manual and we are editing the final version this month. We are going to launch in June and we will be bringing you more exciting details in the weeks ahead.
Of course, you can still use us to do the homework for you but for those of you interested in learning how to find option trades this course is a must for all beginning option traders. Over 20 years of knowledge has been written and broken down so that you will be up and trading in weeks.
We are certain you will learn how Wall Street and the beauty of options really work once you go through our techniques and setups.
We are taking early requests to get a feel on how demand will be so email us over the weekend and you will be included in our “Charter Membership” package. Questions are welcomed. If you are a current subscriber, you will also get the same deal so don’t worry about missing out on anything.
As we head to press, the market is following our game plan and our trades are shaping up nicely. The Dow is down 209 points to 10,573 while the S&P 500 is off by 27 points to 1,130. The Nasdaq is getting sacked for a 64 point loss and is at 2,330.
We will be back Sunday night with the Weekly Wrap. Be there or be square.
Subscribers, check the Members Area for the updates. We know we are an hour early but we have a NEW TRADE and another has hit a triple-digit return!
Tags: dndn, FRE, Imax, option picks, option signals, options alerts, stock options trading, VVUS
Posted in Company Commentary, Market Analysis, Market Commentary | Comments Off