Although the heart-and-soul of the major companies have already reported Q2 earnings results, there are a number of high-profile players reporting this week. We have a few trades for our Daily and Weekly Wrap that will be impacted, hopefully to the upside, and one of them is Dendreon (DNDN, $5.08, up $0.48) which reports their numbers on Thursday.
We have covered the stock for a number of years and were probably the only options newsletter that correctly predicted Provenge, the company’s prostrate cancer drug, would get approval. Shares were near single-digits when we first started covering the company and would eventually soar past $50 in 2010. However, like most biotech companies, there would be setbacks and we suggested getting out of the stock at $40 when shares started to pull back.
We have since kept the stock on our Watch List and added it to our Weekly Wrap as an official recommendation when shares were below $5 in April. We have also sold call options against the position to lower our cost basis as the premiums are rich and actively traded.
Today’s 10% pop bodes well unless it is a classic, buy the rumor, sell the news event. The company will also meet with Needham the day after earnings and call option buying has been heavy in recent weeks. We would love to see a run past $6.
As far as the market, the bears are testing near-term support that served as prior resistance and was expected with futures weak this morning. The key will be if there is further weakness in the second half of trading or if the bulls breakout to new highs.
We have already heard a dozen or so talking heads calling for a 5% pullback this month but none of the knuckleheads brought up the fact July gains were 5%-8% for the indexes. In July the suit-and-ties were also calling for a 5%-10% pullback and it has been amazing to see how much of the “smart money” has been wrong all year long.
As we make the turn, the Dow is down 58 points to 15,600 while the S&P 500 is off 3 points to 1,706. The Nasdaq is lower by 3 points to 3,686 while the Russell 2000 is bucking the trend and is higher by 3 points to 1,062.
We have a lot to cover with our current trades so we have to roll for now. Subscribers, check the Members Area for the updates and stay locked-and-loaded for the remainder of the session in case we pull the trigger on an earnings trade from our Watch List.