9:00am (EST)
It was another day of flat action for the market but this time the bears made it a clean sweep as all 3 of the major indexes fell on Wednesday. We will cover the official numbers, quickly, because the real drama happened after the close.
The Dow fell 27 points to close at 12,938 after touching a low of 12,914. The 12,900 level is holding up well but more importantly we are watching 12,800 on a continued pullback.
The S&P 500 slipped 5 points to settle at 1,357 after kissing 1,355. Support at 1,350 has been money and the bulls are safe down to 1,325 before we would worry.
The Nasdaq dropped for the second-straight session after giving back another 15 points, or 0.5%, to end at 2,933. The low came in at 2,929 and support at 2,900 is still trying to be tested by the bears.
We are hoping Apple (AAPL, $513.04, down $1.81) has some good things to say today in its shareholder meeting that could juice Tech higher. They are on left-coast time so we don’t expect any news until later in the day but we are expecting them to wow Wall Street with something sweet.
Of course, all the water-cooler talk this morning is about Vivus (VVUS, $21.50, up $10.95) which has seen its stock price double overnight. Yes, the talking heads and slick-stuttering pros will be telling you all about their diet drug, Qnexa, which won pre-approval from a FDA advisory board yesterday and how to play it.
Shares were halted all of Wednesday after going out on Tuesday at $10.55 but opened late last night in after-hours trading to a $20 spot. Wow.
Our editor-in-chief first brought you the Vivus story in January 6, 2009 (quotes from that day):
“Orexigen Therapeutics (OREX, $5.89, down $0.10) was up sharply in after-hours trading on news that the company could be announcing something concerning its treatment drug for obesity, Contrave. The company will presenting at a JPMorgan (JPM, $29.25, down $2.10) conference next week which means the rumor mill got started early on what the company will say. The stock was up 20+%, or $1.30, to $7.20 in after-hours trading.
What surprises me is that it took until after the market closed for the stock to make a move as Wall Street seemed to ignore the fact that the company was awarded another patent for Contrave on Monday. It was the fourth patent for the drug which will provide protection until 2024.
Of course, Orexigen isn’t the only outfit trying to rush these new drugs to market. Vivus (VVUS, $5.37, down $0.12) and Arena Pharmaceuticals (ARNA, $4.22, down $0.03) are a couple of others. The race for the next generation of weight-loss drugs is on and all three companies are in phase 3 trials with results due this year. Orexigen appears to have the early lead in this race but there are always risks especially with biotech.” (END)
From January 5th, 2010 (quotes from that day):
“Another stock we are watching for future profits down the road is Vivus (VVUS, $9.44, up $0.24).
The company has a potential blockbuster drug with Qnexa, a treatment for obesity that could be available in early 2011. The company said two late-stage clinical trials went well and asked regulators to approve its drug a week ago.
Vivus has some competition as other “diet’ pills are also expected to debut. Arena Pharmaceuticals (ARNA, $3.52, down $0.03) has also asked the FDA to take a look at their obesity drug, Lorcaserin, while Orexigen Therapeutics (OREX, $7.12, down $0.32) is pushing Contrave by the first half of 2010.
Vivus is the best bet to capture this lucrative market as Wall Street believes Qnexa could be the top go-getter based on the weight loss observed in clinical testing.
Arena’s weight loss drug is safer but Qnexa is also being used in Phase 2 trials to treat diabetes. Talk about two-for-the-money. Imagine the cost savings of having the luxury to manufacture one drug to do two things.
It doesn’t stop there either. Vivus also has a drug, Avanafil, which is in phase 3 trials to treat erectile dysfunction and Luramist which is in phase 2 studies for the treatment of hypoactive sexual desire disorder in women.
The 52-week high for Vivus is $12.88 which was hit on September 10, 2009. We think the stock challenges this level again so file this one away. There will be a trade down the road.” (END)
Our Weekly Wrap hit pay dirt again as we should make around 40% if prices hold up with our current Vivus play. We traded Vivus as a covered call position and made profits of 18%, 17% and 14% in 2011. For 2012 our subscribers made another 17% in January and although our current trade is capped at 40%, we still stayed in Vivus and sold options on our positions as the calls carried hefty premiums at times. This is one of the beautiful secrets the knuckleheads DON’T tell you about covered call writing because they don’t know.
Listen, the pros will argue covered call writing limits your upside while the downside can be more extreme because you are “trapped” in a position. True to a degree, but A) you can also buy more shares when a stock gets cheaper to lower your cost basis. B) and this is the important part, when a stock you are in gets “called away” it doesn’t mean you can’t buy another 100 shares, or 500, to replace the stock you have to sell at the strike price.
Gee, that would be a smart idea huh? This way you DON’T miss a continued run higher! Vivus is a prime example of this strategy playing out and remember, five 20% winners double your money.
Anyway, our Weekly Wrap subscribers will likely have to sell Vivus at $15 if shares are above this level in mid-March and will make another 40% but they have already doubled their money from the start of last year so we haven’t missed anything. Each time we were called away, we reloaded on the stock and we will show you the math in our afternoon update.
Even better, we also recently suggested a trade for Arena Pharmaceuticals (ARNA, $1.81, up $0.01) for our Weekly Wrap and listed some options on our Watch List for the Daily.
Judging by the hundreds of emails we have gotten in the past 12 hours alone, people are going to be making some money today and we love it! Vivus, Las Vegas. For those who don’t follow us on the regular and shorted the stock, start covering.
Futures are up as we head to press and look like this: (Dow +20); S&P 500 (+2); Nasdaq 100 (+7).
Subscribers, check the Members Area for the updates and we will see you again shortly.