12:35pm (EST)
The market is pushing higher as the bulls try to make it 4-in-a-row and a clean sweep for the week. The major indexes are up 4%, on average, as we wind down June and look ahead to what should be an exciting July.
Economic news has been mixed today as jobless claims came in at 428,000 versus expectations for 420,000. Continuing claims dropped 12,000 to 3.70 million. It’s been 2 months since we have seen a print under 400,000 so instead of the president worrying about private jets, he should concentrate more on “shovel-ready” jobs.
Of course, he didn’t speak about all the limos Wall Street uses because Washington does the same but how many $5,000 locks are on each and every government officials office versus Wall Street? Traders on Wall Street all work together in an open environment and their doors are open. The knuckleheads who work for us lock themselves behind closed doors and can’t figure out how to lower a $14 trillion deficit.
Elsewhere, the Chicago Purchasing Managers Index came in at 61.1 which was higher than the previous month and better-than-expected.
The Dow is up 142 points to 12,403 while the S&P 500 is higher by 13 points to 1,319. The Nasdaq is showing a 32 point pop and is at 2,772. Call it window dressing, end of quarter, a bounce off support, whatever, but the bulls are rolling as they look to take out another layer of resistance.
As far as specific stocks, Vivus (VVUS, $8.02, up $0.14) is back over $8 and testing key resistance today after the company filed for FDA approval for its good wood drug, Avabafil. The drug will compete with Pfizer’s (PFE, $20.61, down $0.06) Viagra and other mom-and-pop players, but more importantly, the drug will bring revenue in for Vivus. Of course, we are more interested in seeing the company’s diet drug, Qnexa, come to market but it’s nice that they have a developing pipeline and that they aren’t a one-trick pony.
There has been a party in the Vivus July 8 calls (VVUS110716C000, $0.18, down $0.12) as over 3,000 contracts have traded hands so far today. These options expire in 2 weeks so it will be interesting to watch this battle going forward.
We have an ongoing option trade in Vivus but it’s not the July calls. We went further out because we feel they could be the first company to bring a diet drug to market and obesity is a multi-billion dollar market. The first company in with a safe obesity drug stands to make a windfall.
Other hot stocks this week include Potash (POT, $56.22, down $0.64) which is taking a little breather following a sweet run. We wanted to profile an option trade today because we have following the stock all week on our Watch List. This section in our Members Area lists possible trades that we are watching but aren’t “official” recommendations. However, the action has been incredible. We list these trades because we are either waiting for a breakout or breakdown or because our portfolio is full from time-to-time, and we want to keep fresh ideas on the board as we close out old trades or take profits while looking for new positions.
Sometimes these trades take-off before we can add them to our portfolio and in some cases we don’t like to “chase” but we will still follow the position. Anyhows, Potash trades monthly and WEEKLY options and we just wanted to show you the power of options and how leverage can be a thing of beauty.
Potash started the week at $52.54 and here were our thoughts Monday morning with a chart and a possible option trade (quotes from that day).
“Potash (POT, $52.54, down $0.40)
July 55 calls (POT110716C00055000, $0.70, down $0.10)
Thoughts: If shares can break above their 200-day MA, they could make a quick run back to $55 (black line, blue circles) which was previous support and is now short-term resistance. Potash also trades WEEKLY options so we may use these options or another chain if we see an opportunity.” (END)
Here were our thoughts this morning as we have been following Potash all week:
“Thoughts: These July 55 calls (POT110716C00055000, $2.55, up $1.15) options opened at 72 cents on Monday and our chart work was spot on. The WEEKLY July 55 calls (POT110701C00055000, $2.00, up $1.50) opened at 21 cents on Monday. Yes, we wish this would have been an official recommendation but some of you swung the bat and are being rewarded judging by your happy emails to us over the last few days.” (END)
We suggested selling half positions along the way and we certainly would have been out of the trade by now because the stock has done what we planned on by hitting double-nickels ($55) and the weekly options expire tomorrow.
It would have been super-awesome to have been able to turn $200 into $2,000 or $2,000 into $20,000 but it’s good to know our hard work is paying off for our subscribers. We have bagged quite a few triple-digit winners this year and in June we have hit 4, but this is one elephant we wished we would have bagged earlier in the week.
We have given you a ton of examples this week on how options work and what makes them move because we truly believe the next 6 months are going to offer some incredible trading opportunities. In fact, we could see triple-digit moves in the Dow, up or down, on a regular basis in the weeks and months ahead and it will be a great time to try to make some big money.
If you are not yet a subscriber, we urge you to give us a try. We had a hot June but we are expecting an even hotter July with earnings season coming up, the end of QE2, and with the uncertainty over the U.S debt, you can bet there will be volatility.
We will be back in the morning with our next update but look for an email today with a Special Offer for our Weekly Wrap. This publication is on F-I-R-E!
We are CLOSING 2 trades today and the profits are 50% and 133% which makes it 5 triple-digit winners for June…Subscribers, check the Members Area for the current updates.
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Momentum Stocks (DNDN, NFLX, VVUS) Stay Hot
Monday, January 9th, 2012
1:15pm (EST)
The market has traded near the flat line for much of today’s action with sentiment slightly negative. Perhaps, traders are worried over Alcoa’s (AA, $9.34) earnings after the bell which “officially” starts the 4Q earnings season. We don’t expect much from the company as an earnings miss could be in the cards but the Dow component doesn’t carry much weight except for sentiment. Shares do look tasty at current levels and if they slip a bit after earnings, pick some up. At some point, this will be a double-digit stock again.
Elsewhere, a couple of Biotech stocks we have mentioned over the years and last week are getting nice pops. Dendreon (DNDN, $13.70, up $1.35) continues to shoot higher after reporting better-than-expected sales for its prostate cancer drug, Provenge. We sent out a NEWS FLASH last week when shares broke above $10 and said to watch for further upside movement. The chart we showed you talked about the huge gap to fill if shares broke $12.50. The January 12.50 calls (DNDN120121C00012500, $1.65, up $0.80) have nearly doubled today. Giddy up!
Vivus (VVUS, $11.39, up $1.23) is up 12% on news its obesity drug, Qnexa, could get special labeling. The FDA asked the company to remove the “contraindication” for women of childbearing potential contained in the proposed label. The drug would remain contraindicated for women who are pregnant or who can have children. A contraindication typically indicates that a drug should not be taken because of the health risk that clearly outweigh the benefits.
Alcoa, Dendreon and Vivus are all current recommendations for our Weekly Wrap which went 16-0 in 2011. We have up to 6 trades that could be called away in a few weeks for nice double-digit profits if current levels hold.
We also wanted to update the Netflix (NFLX, $92.82, up $6.53) story from last week when we profiled shares at $77 and said a breakout could be coming. We outlined the “trading box” shares had been stuck in and we said if they broke $80, Netflix could be back at triple-digits again, quickly. The break above the 200-day moving average today is further bullishness.
We also profiled some expensive call options for Netflix that have done well since last Thursday but it wasn’t an “official” trade due to the cost. We usually like to trade 10 or 20 contracts on our trade recommendations and usually we won’t pay more than $2 for an option. At 10 contracts, a $2 option will cost you $2,000 which is a lot of money for some people to place on each trade.
The June 100 calls (NFLS120616C00100000, $14.50, up $3.55) were going for $7.50 last Thursday and would have cost $750 for one contract. A 10 contract trade would have cost $7,500. That is a big bet on a stock that has been more volatile than the market but at current prices it would have been nearly a double.
No worries, we closed out a triple-digit winner last week and we are looking to close a few more this week and next.
We have a lot to cover with our current trades and the New Trade we released this morning. As we head to press, the Dow is up 13 points, the S&P is up a point, while the Nasdaq is higher by 2 points.
Subscribers, check the Members Area for the updates.
Tags: dndn, Momentum stocks, momentum trading, NFLX, NFLX call options, VVUS
Posted in Hot Stocks, Market Analysis, Market Commentary | Comments Off