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!