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Market Updates

Small caps still green

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The major market indexes are now in the red with the Dow Industrials (INDU) down 87 points, S&P 500 (SPX.X) lower by 6 points and broader NASDAQ Composite (COMPX) just fractionally red, while the larger cap NASDAQ-100 Index (NDX.X) falls 1 point.

The smaller caps as depicted by the Russell-2000 Index (RUT.X) 406.93 +0.14% hold onto a marginal gain with some smaller cap drug stocks getting a boost from Food and Drug Administrations decisions.

Share of Axcan Pharmaceuticals (NASDAQ:AXCA) $11.15 +1.45 are higher after the company said that is has received an approval letter for Photofrin, which is a drug designed for the treatment of High Grade Dysplasia associated with Barrett's Esophagus. Final approval for Photofrin is expected to be issued in the next few months.

Shares of Impax Laboratories (NASDAQ:IPXL) $5.25 +7.8% are also getting a boost after announcing that it received FDA acceptance of IPXL's ANDA (Abbreviated New Drug Application) for a generic version of Tricor 160-milligram tablets. The company said the FDA's acceptance of the ANDA means the agency has made a determination that the application is sufficiently complete and ready for final review. IPXL had 2001 sales of $6.9 million and said that it believes it is on track to reach the high end of its goal of 6 to 8 new product filings in 2002. IPXL currently has 19 ANDAs pending at the FDA, four of which have received tentative approval from the FDA.

Impax Laboratories Chart - $0.25 and $0.50 box scale

Today's news out of IPXL sounds bullish with the company saying it is on track for more FDA approvals. The p/f chart of IPXL offers "small cap" bulls a good entry point for 1/4 or 1/2 bullish positions with a nice tight stop on the underlying stock at $4.00, with a longer-term bullish vertical count of $12.75 giving the stock some nice upside potential. For call options, I'd prefer too look as far out as possible and buy some time in the May $5 calls at approx. $1.45 offer. With the stock trading $5.27 here, a $1.45 call risk is similar to that of the underlying stock with a stop at $4.00, but offers the option trader the benefit of time with similar risk.

Using this weekend's "Ask the Analyst" column on trading like a market maker, I placed retracement on IPXL from $2.75 to $9.71. This gives us market maker support at 19.1% retracement of $4.08, near-term resistance at 38.2% of $5.41 and then 50% at $6.23.

Jeff Bailey

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