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.
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