1. Market Summary
“The market has moved 4% for the month of September and we will need another 2%-3% over the next 2 weeks to reach our fluff targets of Dow 14,000; S&P 1,500; Nasdaq 3,250; and 900 for Russell 2000.
Monday’s have been dominated by the bears over the past 3 months and a win by the bulls would be a good sign to start the week. The Dow will get a new component on Monday as Kraft Foods (KFT, $39.93, down $0.20) is out and Unitedhealth Group (UNH, $54.25, up $0.36) is in. This could help the index as traders prop up the stock.
Kraft will be splitting into two companies. Kraft Foods which will focus growing the grocery business and will trade on the Nasdaq under the ticker symbol “KFRT” starting next Monday. The parent company will be called Mondelez International and will also trade on the Nasdaq under the ticker symbol “MDLZ”.
FedEx (FDX, $90.15, down $0.21) will report earnings on Tuesday and they warned Wall Street a few weeks ago they were going to miss estimates. This could be bullish for the stock as they have lowered expectations already. The Dow Transports have been in rally mode and we told you this was a key index to watch coming into September to confirm the Dow and blue-chips had legs.
Here is how the Transports look after Friday’s close:
The rest of the week is filled with a few high-profile earnings from companies with different fiscal year endings, but official 3Q earnings season won’t start until the second week of October.
Between now and the beginning of October, companies usually warn and with FedEx and Intel (INTC, $23.37, up $0.02) giving Wall Street a heads-up, others will follow. AK Steel Holding (AKS, $5.87, down $0.57) tried to sneak theirs in on Friday after saying they expect higher losses for the quarter. That didn’t work as shares tanked 9%.
Economic news will be dominated by Housing numbers and they should come in better-than-expected although it’s not a given. The big report should be the Philly Fed on Thursday.
This week is option expiration week for the September chains and it can be bullish, especially on Fridays. The Dow has been up on the past seven September Triple Witching Friday’s and 8-out-of-9. Triple Witching (TW) is when all option and index futures expire and it happens 4 times a year – March, June, September and December. The talking heads will throw caution at the event but again, it is usually a bullish day for September TW.
Apple (AAPL, $691.28, up $8.30) certainly helped the bulls by surging to new all-time highs. Shares reached a peak of $696.98 on Friday and here were our thoughts midweek on the stock and before the official launch of the iPhone5.
“Apple (AAPL, $660.39, down $0.20) is expected to announce the iPhone5 today and there are a ton of analysts saying shares have a history of selling off after a product announcement. While this is true, this time could be different as Apple will sell a ton of these phones. There are also rumors of an iPad mini which would also be big news.” (END)
Shares of Apple were up $30 afterwards and $10 for the week. If shares do selloff from here or pullback, you can bet there will be a knucklehead that says, we told you so. Well, if they do, we will have to remind of them of the $40 point pop AFTER the announcement.
Apple won another key legal verdict last week that will allow them to file for an injunction against Google’s Motorola devices. This follows a huge legal victory against Samsung and gives Apple leverage going forward. As far as the iPad mini, we think it could now come in October which could get shares to $750-$800 on continued momentum.
With Europe and the Fed yesterday’s news, the market should continue higher this week and into month end as some mutual and hedge fund managers will surely be chasing. Many of them have sat out the rally following their August vacations and we told you they could be forced to buy as they also discounted The Bernanke whom they thought would disappoint the market. It’s a good thing poker is our second favorite profession besides trading options.” (from 9/16/2012 Weekly Wrap/ Monday Morning Outlook)…
The bulls got off to a slow start for the week as the market struggled to retain its momentum following the QE3 here at home and around the globe quantitative easing efforts. A slight pause was expected following the strong September gains but the bears didn’t have much luck with trying to crack support and their lack of energy showed.
The pace picked-up by Wednesday as the Dow challenged new highs but a slowdown in China and uninspiring unemployment numbers weighed on Thursday’s action. Our prediction of a bullish option expiration Friday based on history looked good for much of the session but the bears played just enough defense in the final hour of trading to pull even and win the week.
The Dow fell 17 points, or 0.1%, to end at 13,579 on Friday. The blue-chips traded to a low of 13,503 on Thursday which was the low for the week and support was strong at 13,500 which was also tested on Tuesday’s dip to 13,517. There is further support at 13,350 and then 13,200. We said the bulls needed to clear the 13,600 level on a close and they came close a few times including pushing new 52-week highs on Friday. The Dow traded to 13,647 which keeps 13,800-14,000 in play but another week below 13,600 wouls be bearish. The Dow came into the week at 13,593 and lost 14 points, or 0.1%, by Friday’s close. For 2012, the blue-chips are higher by 1,362 points, or 11.2%.
Here is last week’s 10-year chart for the Dow:
The S&P 500 slipped a tenth of a point and finished at 1,460. Support was strong at 1,450 throughout the week but Thursday’s test to 1,449.98 was a reminder the bears are still looking to get the index back below 1,425 and then 1,400. We were looking for a push past 1,475 and up to our 1,500 September target but the best the bulls could do was 1,465 on Wednesday and Friday’s print of 1,467. The previous Friday’s high was 1,474.51. The S&P 500 started Monday at 1,465 and was down 5 points, or 0.4%, for the week. For the year, the index is up 198 points, or 16.1%.
The S&P 500 chart from last week:
The Nasdaq gained 4 points, or 0.1%, to close at 3,179.96. We were looking for a move past 3,200 for confirmation a run to 3,250 is coming but Friday’s high of 3,196.93 fell just short. The bears had trouble cracking 3,150 as their best effort came on Thursday’s push to 3,156. If they can get under this level, a back test down to 3,125-3,100 could be in the mix. The Nasdaq started Monday at 3,183.95 and needed 4 more points to breakeven for the week. YTD, the index is showing a gain of 570 points, or 22.1%.
Here is the chart for the Nasdaq from last week:
The Russell 2000 also added 4 points, or 0.5%, on Friday and closed at 855. The small-caps trended lower all week and fell below short-term support of 850 after kissing 847 on Thursday. The bulls did manage to get back above this level at the close by a point and there would further risk down to 820 on a break but Friday’s action was bullish following the push to 860. The bulls will need to clear 875, first, before they think about meeting our 900 fluff target. The Russell 2000 began the week at 864.70 and was down 9 points, or 1.1%, following Friday’s close. For 2012, the index has advanced 115 points, or 15.5%.
Here is the chart for the Russell 2000 from last week:
The S&P Volatility Index ($VIX, 13.98, down 0.09) came into the week at 14.51 and stayed below 15 all week. The bears pushed a high of 14.92 on Monday but the dips were bought and Friday’s push down to 13.69 was a reminder that 10 is still possible on a continued rally. A move above 15 would get 17.50 in play but Wall Street won’t get nervous until 20 trips.
Here is VIX longer-term chart from last week:
Gold came with $10 of tripping our near-term target of $1,800 we gave back in July and our end of year target of $2,000. Friday’s high was $1,790 and ounce.
Silver also pushed new highs and is close to clearing our near-term target of $36. We have said Silver could run to $40 by yearend and we told you back the truck up in July at $26.
We came into the week with the market showing a 4% gain for September and we said the indexes were 2%-3% away from our “fluff” targets. With one week left, we were looking for the bulls to get to within 1% of our fluff targets for the month and with October just around the corner the task just got a little harder but still doable.
There could be a flood of “window dressing” to begin the week but the suit-and-ties will need to be careful. We mentioned that many of the pros went on their late August vacations and were hoping for a pullback when they returned but they never got it. The fund managers who are lagging the market are going to feel pressure to push while the ones showing a negative return will likely get fired.
We have been mentioning the start of 3Q earnings season and we can now begin the countdown. Alcoa (AA, $9.13, down $0.12) will announce earnings in 16 days, or October 10. The market will be closed on October 8 for Columbus Day.
We have already seen a number of high profile earnings warnings so next week will be the week even more companies could start confessing their sins. Next week is also the last week the suit-and-ties can add positions for the quarter, or sell. We have said many of the pros are way behind the market’s returns and they will have a hard time explaining to their clients they didn’t make them any money this year with Tech up 20%.
Of course, you are considered a Wall Street whiz if you can make your clients 8%-10% a year. Although we love our brothers and sisters who play the game with us, we like to shoot for 100% returns a year for our subscribers. We believe we have done that 7x over this year.
Our point is, we do have high expectations for ourselves but making 10% a year is phenomenal in today’s world so we need to remember this if we get into a flat market of there is a pullback.
The only other curveball we see coming could be a Spain bailout but this is already being anticipated and that may or not happen this week. Last week may have been dull and many of the pros are calling for a pullback. There is an old saying that says “never short a dull market” and the bears a few layers of support to crack before they get on track.
We do need to respect the possibility of a pullback because the warning signs are there but all signs are pointing towards a push to new 52-week highs.
As we head to press, futures are showing a slightly lower open for Monday but it is early. Dow futures are down 23 points to 13,495 while the S&P 500 futures are lower by 2 points to 1,456. The Nasdaq 100 futures are off by 3 points to 2,847.
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Key of Technicals Used In Following Articles
2. Jazz Pharmaceuticals (JAZZ) – Jazz Up Your Long-term Holdings
By Michael Bryant
We closed an option trade on Jazz Pharmaceuticals (JAZZ, $58.50, up $1.49) on Monday’s breakout, profiting nicely. The last time we mentioned it in our Weekly Wrap was on April 26, 2009. Back then, shares traded around $0.60 a share. A lot has changed since. Will the stock continue to rise, building off of its momentum from the breakout?
However, with new austerity measures due to the euro crisis, basic scientific research in Ireland could face painful cutbacks. Also, seven of the world’s ten best-selling drugs losing patent protection are manufactured in Ireland. This could cause a slowdown in exports, hurting the economy. Good news is that we do not expect this to hurt the company much, due to its little revenue exposure to Europe. The table below shows the distribution of revenue among geographic regions. Numbers are in millions of dollars.
|
|
United States |
Europe |
Other |
|
1st quarter 2010 |
$34.062 (96.841%) |
$1.106 (3.144%) |
$0.005 (0.014%) |
|
2nd quarter 2010 |
$39.564 (97.679%) |
$0.936 (2.311%) |
$0.004 (0.010%) |
|
3rd quarter 2010 |
$43.564 (97.343%) |
$0.907 (2.027%) |
$0.282 (0.630%) |
|
4th quarter 2010 |
$52.127 (97.706%) |
$1.220 (2.287%) |
$0.004 (0.007%) |
|
1st quarter 2011 |
$49.899 (98.070%) |
$0.977 (1.920%) |
$0.005 (0.010%) |
|
2nd quarter 2011 |
$62.931 (97.466%) |
$1.314 (2.035%) |
$0.322 (0.499%) |
|
3rd quarter 2011 |
$72.218 (98.533%) |
$1.071 (1.461%) |
$0.004 (0.005%) |
|
4th quarter 2011 |
$80.670 (96.569%) |
$2.862 (3.426%) |
$0.004 (0.005%) |
|
1st quarter 2012 |
$102.154 (94.226%) |
$5.914 (5.455%) |
$0.346 (0.319%) |
|
2nd quarter 2012 |
$124.748 (96.301%) |
$3.172 (2.449%) |
$1.619 (1.250%) |
Over the last two years, about 96%-97% of total revenue has consistently come from the United States, while 2%-5% has come from Europe. Just recently, revenue has started to grow outside of Europe and the United States. We expect U.S. revenue to remain at 96% while any shrinking of European revenue will be made up elsewhere.
The company serves the narcolepsy, oncology, psychiatry, pain, and women’s health markets. Narcolepsy is a nervous system disorder that causes excessive sleepiness such that patients fall asleep irregularly and frequently. The disorder can also cause cataplexy, which is characterized by muscle fatigue. In oncology, the study of cancer, it provides treatment for oral mucositis, the buildup of mucus in the mouth and throat and is a common side effect of some cancer treatments. It also treats acute lymphoblastic leukemia, the overproduction of white blood cells in the bone marrow and is the most common type of cancer in children. In psychiatry, the study and treatment of mental disorders, it provides treatment for schizophrenia, which is characterized by a breakdown of thought processes, by a lack of ability to differentiate from reality, and by poor emotional responsiveness. It also treats obsessive compulsive disorder, an anxiety disorder characterized by such thing as repeated checking, excessive washing or cleaning, preoccupation with violent or religious thoughts, extreme hoarding, and relationship-related obsessions.
It makes clozapine, a drug used in the treatment of schizophrenia and is also used off-label in the treatment of bipolar disorder. Prialt is a non-opioid intrathecal analgesic for refractory severe chronic pain. Intrathecal means occurring in the space under the arachnoid membrane of the brain or spinal cord. An opioid are psychoactive chemicals found in the opium plant and binds to opioid receptors. Analgesic (painkiller) effects of opioids are due to decreased perception of pain, decreased reaction to pain as well as increased tolerance to pain. Refractory pain does not yield, or does not yield readily, to treatment. It also treats vulvovaginitis (inflammation of the vagina and vulva), menopause (permanent cessation of the primary functions of the human ovaries), and mastocytosis (presence of too many tissue resident cells know as mast cells).
Products:
|
Narcolepsy |
Xyrem, sodium oxybate oral solution for the treatment of cataplexy and excessive daytime sleepiness |
|
Oncology |
Caphosol, a treatment for oral mucositis |
|
|
Erwinaze for patients with acute lymphoblastic leukemia |
|
|
Quadramet, a pain drug for cancer patients whose tumors have spread to the bone |
|
|
ProstaScint, an imaging agent that is used in diagnosing prostate cancer |
|
Psychiatry |
FazaClo (clozapine, USP), orally disintegrating clozapine tablets for the treatment of resistant schizophrenia |
|
Luvox CR, extended-release capsules for the treatment of obsessive compulsive disorder |
|
|
Pain |
Prialt, a non-opioid intrathecal analgesic for refractory severe chronic pain |
|
Women’s Health |
AVC (sulfanilamide) cream to treat vulvovaginitis caused by Candida albicans |
|
Elestrin for moderate-to-severe vasomotor symptoms associated with menopause |
|
|
Gastrocrom, oral concentrate for mastocytosis |
|
|
Natelle and Gesticare prescription prenatal vitamins |
|
|
Niravam for the management of anxiety disorder or the short-term relief of symptoms of anxiety, as well as for panic disorder with or without agoraphobia |
|
|
Parcopa for idiopathic Parkinson’s disease |
|
|
Urelle for irritative voiding, as well as for inflammation, hypermotility, and pain that accompany lower urinary tract infections |
Pipeline:
|
Asparec |
For E. Coli asparaginase hypersensitivity |
Phase I in EU |
|
Clozapine |
Additional formulations to provide potential new dosing options to patients and physicians. |
Oral suspension formulation NDA submitted to FDA |
|
Erwinaze |
Exploring additional labeling opportunities |
IV formulation |
|
Leukotac |
Treatment of steroid-refractory acute graft vs. host disease |
Phase III in EU |
As can be seen, Xyrem has been the primary driver of revenue, with Luvox CR (later Luvox CR and FazaClo) making most of the rest. Only till recently other drugs such as Prialt have started to contribute to total revenue. In the latest quarter, Xyrem made up 69% of total sales.
This is why it was so important that the court ruled favorably for the company in its 2-year-old patent suit against Roxane Laboratories, causing the stock to soar 15% in six times its normal trading volume Monday, September 17th. The US-based subsidiary of Germany’s Boehringer Ingelheim had filed an abbreviated new drug application with the FDA requesting approval to market a generic version of Xyrem. Jazz then countersued Roxane to prevent them from selling the generic. The ruling seems to allow the company to continue to enjoy Xyrem’s revenue growth for a while longer without generic competition. The ruling did not address Jazz’s new patent application for Xyrem, which it submitted on September 11th.
The company greatly expanded its portfolio through acquisitions. On September 19, 2011, it agreed to merge with Azur Pharma, adding chronic pain treatment Prialt and schizophrenia drug FazaClo to its rapidly expanding drug portfolio. It also obtained a portfolio of women’s health products in its acquisition of Azur Pharma. Then on April 27, 2012, it bought cancer drug maker EUSA Pharma for $650 million, plus agreed to pay another $50 million if EUSA’s leukemia drug Erwinaze reaches its 2013 target for U.S. sales. FDA approved Erwinaze in November 2011 and has orphan drug status in the U.S. until November 2018. Orphan drug status gives drug makers tax reductions and the exclusive rights to the cure for a specific rare condition for a period of seven years after approval. The drug has marketing exclusivity through 2023 elsewhere. It is approved in seven other countries and marketed under the name Erwinase. EUSA’s other products include ProstaScint, Quadramet, and Caphosol.
To focus more on its core business, it agreed to sell its women’s health business to Meda (an international specialty pharmaceutical company) for $95 million in cash on September 6th of this year. Last year, combined sales of the unit were only $30 million. While this provides less diversification, the extra cash can be used to fund development of its four pipeline candidates, which may see higher growth potential.
In the United States, Xyrem is sold to Express Scripts (ESSDS), which ships Xyrem directly to patients. UCB Pharma is their European commercial partner for Xyrem.
The company has a supply agreement with US-based Siegfried for sodium oxybate, which expires in April 2015 but is subject to automatic three-year extension. It also has the right to purchase a portion of its worldwide requirements of sodium oxybate from other suppliers. It signed an agreement with Patheon Pharmaceuticals to provide a worldwide supply of Xyrem. The current term of the agreement with Patheon extends until July 2014 and may be extended for additional two-year terms.
The company reports 3rd quarter earnings after the market close Tuesday, October 30th. Analysts expect 3rd quarter earnings of $1.32 per share on revenue of $172.35 million.
Expected revenue growth for 3rd and 4th quarters seems a little high, but earnings growth seems a little low. Concern is that profit (difference between revenue and total expenses) decreased in the 1st (3/12) and 2nd (6/12) quarters.
Royalties and contract revenues increased in 2011 compared to 2010, primarily due to the recognition of a $1.5 million milestone payment related to sales of Xyrem in Europe by UCB Pharma under a license agreement. The company expects royalty and contract revenue to decrease slightly in 2012 as compared to 2011.
While the threat from generic drugs seems over for now, Provigil and Nuvigil (acquired by Teva when it purchased Cephalon), Concerta from Novartis, and Pfizer’s Pristiq are all vying for the same space as Xyrem.
At $58.50, the stock is below its mean target of $64.33 made by the 9 analysts recorded by Thomson/First Call. Median target is $66.00, high target is $76.00, and low target is $40.00. Using a scale of 1.0 as a strong buy and 5.0 as a sell, the average rating of the stock was 1.4, up from 1.8 a week ago.
|
|
Current Month |
Last Month |
Two Months Ago |
Three Months Ago |
|
Strong Buy |
6 |
3 |
3 |
4 |
|
Buy |
2 |
5 |
5 |
4 |
|
Hold |
0 |
0 |
0 |
0 |
|
Underperform |
0 |
0 |
0 |
0 |
|
Sell |
0 |
0 |
0 |
0 |
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3. Earnings
The companies in BOLD, we are looking at as possible trades and we may list call or put options on them in our Daily Newsletter. If they become official recommendations, we sent out Trade Alerts or include them in our 9am and 1pm updates that come out during the week (Quotes are from 9/21/12 close)
By Catherine Tierney
Monday
ACNB (ACNB, $15.00, down $0.51), China Natural Resources (CHNR, $6.50, down $0.10), Comtech Telecommunications (CMTL, $28.32, Flat), Daxor (DXR, $7.96, down $0.75), Ennis (EBF, $16.54, down $0.08), JW Mays (MAYS, $20.99, Flat), Lennar (LEN, $37.51, up $0.91), Paychex (PAYX, $34.55, up $0.08), Red Hat (RHT, $57.64, up $0.80), Thor Industries (THO, $35.09, down $0.39)
Tuesday
CalAmp (CAMP, $7.52, up $0.21), Carnival (CCL, $37.39, down $0.21), Copart (CPRT, $27.56, down $0.04), FactSet Research (FDS, $100.55, down $0.49), Jabil Circuit (JBL, $21.55, down $0.40), Neogen (NEOG, $39.83, up $0.78), OMNOVA (OMN, $8.78, down $0.05), SYNNEX (SNX, $35.28, up $0.06), Vail Resorts (MTN, $54.07, down $0.19)
Wednesday
Ferrellgas (FGP, $19.68, down $0.12), Landec (LNDC, $11.37, down $0.03), Oconee Federal Financial (OFED, $14.00, up $0.50), Progress Software (PRGS, $20.43, down $0.06), Saba Software (SABA, $9.74, up $0.16), Sycamore Networks (SCMR, $15.43, down $0.21), Texas Industries (TXI, $42.30, up $0.38), Worthington Industries (WOR, $23.32, down $0.20)
Thursday
Accenture (CAN, $65.25, up $0.06), Actuant (ATU, $31.09, up $0.56), AZZ (AZZ, $34.50, down $0.41), Discover Financial (DFS, $38.62, up $0.46), Global Payments (GPN, $44.03, up $0.43), IDT (IDT, $10.57, up $0.12), McCormick &Company (MKC, $63.16, down $0.21), Micron Technology (MU, $6.36, down $0.09), Nike (NKE, $96.52, down $0.20), S&W Seed (SANW, $6.05)
Friday
American Greetings (AM, $14.78, down $0.31), Finish Line (FINL, $23.30, down $0.18), Gladstone Investment (GAIN, $7.94, up $0.07), HB Fuller (FUL, $34.00, up $0.04), Marine Petroleum (MARPS, $21.71, down $0.53), Walgreen (WAG, $35.11, down $0.44)
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4. Weekly Wrap Covered Call Portfolio Update (Closing prices as of 9/21/12)
Closed Trades for 2012 (24-0, overall): ARNA +117%, SZYM +11%, BAC +26%, EFTC +8%, SZYM +55%, VVUS +38%, CALL +19%, BAC +20%, SYMC +16%, DAR +20%,TIVO +5%, MGM +22%, ZNGA+13%, SGMS +6%, VVUS +17%, F +8%, AA +7%, CLNE +27%, DNDN +18%, MGM +19%, ACAS +3%, P +9%, BAC +6%, AA +3%.
TiVo (TIVO, $9.56, down $0.16)
October 10 calls (TIVO121020C00010000, $0.47, up $0.05)
Original Entry Price: $9.65 (9/19/12)
Lowered Price from Selling Options: $9.17
Exit Target: $12+
Return: 4%
Stop Target: $7
Action: TiVo has seen a lot of call buying activity lately and shares are on the verge of breaking $10 which has been short-term resistance. A move above this level should get $11-$12 in play. Short-term support is at $9.25 and longer-term support is at $9.
We recommended buying the stock at $9.65 on 9/19/2012 and for every 100 shares to sell the October 10 call for 48 cents. This lowered the cost basis to $9.17.
If shares are called away in mid-October at $10 the trade will make 9%.
Solazyme (SZYM, $11.33, up $0.05)
Original Entry Price: $12.35 (8/9/12)
Lowered Price from Selling Options: $11.55
Exit Target: $15+
Return: 2%
Stop Target: $9
Action: The September 12.50 calls expired on Friday so we will look to sell an October or November call this week to lower our cost basis again. Resistance has been strong at $12 and the 100-day MA but we liked the run shares made on Friday. A close above this level would get $12.50-$13 back in the mix. Support has been holding at $11.00.
We recommended buying the stock at $12.35 on 8/9/2012 and for every 100 shares to sell the September 12.50 calls for 80 cents. This lowered the cost basis to $11.55.
If shares are called away in mid-September at $12.50 the trade will make 8%.
Vivus (VVUS, $21.00, down $2.72)
Original Entry Price: $22.70 (7/27/12)
Lowered Price from Selling Options: $21.35
Exit Target: $30+
Return: -2%
Stop Target: $15
Action: The September 24 calls expired on Friday as shares fell 11%. There are some concerns Europe may not approve its diet drug…
Shares fell to a low of $20.35 and we have mentioned longer-term support has been strong at $20. There is still a chance for a dip down to $18 on continued weakness and resistance at $22 could be in play until some of the storm clouds clear. We will wait for a move above this level before writing another call option.
We recommended buying the stock at $22.70 on 7/27/2012 and for every 100 shares to sell the August 24 calls for 95 cents. This lowered the cost basis to $21.75.
On 9/6/12 we sold the September 24 calls for 40 cents which lowered our cost basis to $21.35. If we are called away at $24 in a couple of weeks, the trade will make 12%.
Antares Pharma (ATRS, $4.33, up $0.01)
November 5 calls (ATRS121117C00005000, $0.30, up $0.05)
Original Entry Price: $4.94 (7/13/12)
Lowered Price from Selling Options: $3.94
Exit Target: $8+
Return: 10%
Stop Target: None
Action: Shares broke above $4.10 on Tuesday after gaining 6% which has been strong resistance. For the week, Antares was up 10%. Friday high of $4.40 is right at its 50-day MA and a close above this level could lead to a trip back up to $4.50-$5 over the near-term. Support has moved up to $4.
We recommended buying the stock at $4.94 on 7/13/2012 and for every 100 shares to sell the August 5 calls for 70 cents. This lowered the cost basis to $4.24.
On 9/6/12 we sold the November 5 calls for 30 cents which lowered our cost basis to $3.94. If we are called away at $5 in mid-November the trade will make 27%. .
Antares Pharma (ATRS, $4.33, up $0.02)
February (2013) 7.50 calls (ATRS130216C0007500, $0.35, flat)
Original Entry Price: $0.80 (7/13/12)
Exit Target: $1.60
Return: -56%
Stop Target: None
Action: This is a LEAP call option which has nearly 6 months before expiration. We have a target of $8-$10 for the stock which is a strong takeover candidate.
Pizza Inn (PZZI, $3.33, down $0.03)
Original Entry Price: $4.50 (2/22/12)
Lowered Price from Selling Options: No options listed (yet)
Exit Target: $9
Return: -26%
Stop Target: None
Action: Shares traded to a low of $3.06 which was prior resistance and now longer-term support. A break below $3 would lead to the low $2’s which is where we would back the truck up. A move above resistance at $3.50 would be bullish for a possible run back to $4. On Thursday, shares reached $3.44. Our 2013 price target is $10+ and this could be an incredible long-term play once the roll out of new stores is complete.
Pizza Inn continues to open new pie shops in Texas. The company’s latest restaurant on the University of Texas campus was its seventh location with an eighth planned in Allen, Texas.
The company recently won the prestigious 2012 Hot Concepts award from the Nation’s Restaurant News and the buzz is growing. The company is targeting 75 major cities to expand and some will be company owned or franchised. Insiders are buying shares at these low levels and we feel you should be loading up too while they are still under $4. We have a 12 to 18-month price target of $10 for Pizza Inn.
MGM Resorts (MGM, $10.72, down $0.07)
Original Entry Price: $13.77 (2/2/12)
Lowered Price from Selling Options: $12.67
Exit Target: $15
Return: -15%
Stop Target: None
Action: The 200-day MA proved to be a brick wall as shares quickly reversed course last week and fell 5%. Short-term support is at $10.50 and the 100-day MA but a break below this level would get $10 back in play again. We still like the company’s long-term prospects and online gaming is coming in 2013. We were hoping to sell another call option on a move above $12 but we don’t mind holding shares until then.
We recommended buying the stock at $13.77 on 2/2/2012 and for every 100 shares to sell the March 15 calls for 45 cents. This lowered the cost basis to $13.32.
On 3/20/12 we recommended selling the April 14 calls for $0.65 which lowered the cost basis to $12.67.
Newpark Resources (NR, $7.66, up $0.09)
Original Entry Price: $9.45 (7/27/11)
Lowered Price from Selling Options: $7.85
Exit Target: $11
Return: -2%
Stop Target: None
Action: Newpark fell back below $8 to start the week and on Thursday hit a low of $7.47 which is just above the 200-day MA. A break below this level could lead to $7. We would like to see a run past $8 this week and a pop past $8.20 would be bullish.
We recommended buying the stock at $9.45 on 7/27/2011 and for every 100 shares to sell the August 10 calls for 50 cents. This lowered the cost basis to $8.95.
On 9/15/2011 we recommended selling the December 10 calls for $0.85 which lowered the cost basis to $8.10.
On 1/25/2012 we recommended selling the March 12.50 calls for $0.25 which lowered the cost basis to $7.85.
Trades on HOLD: DryShips (DRYS, $2.53, down $0.02), AKS Steel Holding (AKS, $5.25, down $0.05), Rare Element Resources (REE, $4.97, down $0.07), Rambus (RMBS, $4.93,down $0.01), Patriot Coal (PCXCQ, $0.14, up $0.01), OCZ Technology Group (OCZ, $4.15, down $0.15), Bebe Stores (BEBE, $5.19, up $0.14), Scientific Games (SGMS, $7.87, down $0.09)
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5. Week Ahead
There are no economic reports due out on Monday.
Tuesday starts-off with the Case-Shiller 20-City Index report 9am (EST) followed by Consumer Confidence and the FHFA Housing Price Index at 10am.
Wednesday’s action will include the MBA Mortgage Index which is due out at 7am. At 10am, New Home Sale numbers will be released with Crude Inventories 30 minutes afterwards.
Initial and Continuing Claims will be released on Thursday at 8:30am along with GDP (Gross Domestic Product) and Durable Orders numbers. All of these reports are important and carry weight so we will be watching the futures market carefully. At 10am, Pending Home Sales will hit the Street.
Friday is a busy day with Personal Income and Spending figures being announced at 8:30am. The Chicago PMI numbers will be out at 9:45am, or 15 minutes after the market opens, and could pack a 1 punch. Michigan Sentiment 10 minutes later could be 2 punch for either side depending on if they both come in for better or worse.