NEW BULLISH Plays

Relypsa, Inc. - RLYP - close: 36.79 change: +0.77

Stop Loss: 34.70
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on May -- at $---.--
Listed on May 30, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 526 thousand
New Positions: Yes, see below

Company Description

Trade Description:
Biotech stocks showed relative strength in May. One biotech that might be worth looking at is RLYP. This is a small cap stock but it's in the upper range of small caps with a market capitalization around $1.5 billion.

According to the company, "Relypsa, Inc. is a biopharmaceutical company focused on the development and commercialization of non-absorbed polymeric drugs to treat disorders in the areas of renal, cardiovascular and metabolic diseases. The company's two-part pivotal Phase 3 trial of its lead product candidate, Patiromer for Oral Suspension, for the treatment of hyperkalemia, a potentially life-threatening condition defined as abnormally elevated levels of potassium in the blood, has been completed and the primary and secondary endpoints were met. A New Drug Application for Patiromer for Oral Suspension for the treatment of hyperkalemia was accepted by the U.S. Food and Drug Administration and is currently under review. Relypsa has global royalty-free commercialization rights to Patiromer for Oral Suspension, which has intellectual property protection in the United States until at least 2030."

Stocks like RLYP can be binary trades for long-term investors. You either win big or lose big depending on the company's pipeline. Right now RLYP's patiromer FOS is the main product in development. The FDA is expected to come out with a decision on RLYP's new drug application (NDA) by October this year. It's worth mentioning that RYLP does have competition from ZS Pharma who is working on a similar treatment. As RLYP doesn't have any significant sales yet the earnings news doesn't really help us as traders. Generally speaking biotech earnings for companies without any sales tend to be lumpy due to milestone payments from partners.

RLYP rallied on its recent earnings report even though they don't have sales. The net loss for 2015 Q1 was $0.78 per share versus $0.54 a year ago. Analysts were expecting a loss of $0.87. The news appeared to spark some short covering.

Shares of RLYP are trading technically. They bounced near the 38.2% Fibonacci retracement. They were showing relative strength on Friday with a +2.1% gain. You could also argue that RLYP has produced an inverse head-and-shoulders pattern, which is bullish. If the stock can rally above $38.00 it will produce a new triple-top breakout buy signal on its point & figure chart. We are suggesting a trigger to launch small bullish positions at $37.30. This should be considered a higher-risk, more aggressive trade.

Trigger @ $37.30 *Small positions to limit risk*

- Suggested Positions -

Buy RLYP stock @ $37.30

- (or for more adventurous traders, try this option) -

Buy the SEP $40 CALL (RLYP150918C40) current ask $3.20
option price is a current quote and not a suggested entry price.

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

Option Format: symbol-year-month-day-call-strike

Daily Chart:


NEW BEARISH Plays

Gulfport Energy Corp. - GPOR - close: 43.16 change: -0.79

Stop Loss: 45.35
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on May -- at $---.--
Listed on May 30, 2015
Time Frame: 8 to 12 weeks (option traders should exit prior to expiration
Average Daily Volume = 1.5 million
New Positions: Yes, see below

Company Description

Trade Description:
Normally a weaker dollar is bullish for commodities. Yet the U.S. dollar's decline from March into May did not help the price of natural gas very much. The price of natural gas did bounce for three weeks in May but it's already reversed much of these gains. Now the U.S. dollar is on the rise and expected to keep climbing thanks to weaker foreign currencies.

Another problem for oil and gas explorers like GPOR is falling demand for natural gas. Weather has been mild this spring and that has decreased demand for natural gas from utilities, who are big consumers. At the same time inventories for natgas in the U.S. are building.

The EIA, the U.S. Energy Information Administration, said that current natgas inventories is up +59% from the same time a year ago and it's up +1.7% from the five-year average. Right now natural gas futures are trading around $2.64 per MMBtu (British thermal units in millions) and they look like they're headed for the 2012 lows near $2.00.

GPOR is in the basic materials sector. According to the company, "Gulfport Energy Corporation is an Oklahoma City-based independent oil and natural gas exploration and production company with its principal producing properties located in the Utica Shale of Eastern Ohio and along the Louisiana Gulf Coast. In addition, Gulfport holds a sizeable acreage position in the Alberta Oil Sands in Canada through its 24.9% interest in Grizzly Oil Sands ULC."

Their exposure to Canada's oil sands isn't helping them at the moment. In their most recent earnings report GPOR said that their production in Canada is currently halted due to low commodity prices.

Speaking of earnings, the company has delivered some strong results in recent quarters. Back in November they reported Q3 results above expectations. Revenues soared +146% from the year ago quarter. They reported similar results in February (their Q4 report). This is because GPOR's production has surged. In the fourth quarter of 2014 their oil and gas production was up +282% from the year ago period.

GPOR's most recent earnings report was announced on May 5th. The company reported a loss of ($0.08) per share. Analysts were expecting a loss of ($0.09). Revenues did come in above expectations but traders sold the news. Shares plunged and broke their three-month bullish trend of higher lows.

GPOR's stock price has been unable to recover. Traders have been selling the rallies. Goldman Sachs didn't help when they downgraded GPOR from "neutral" to a "sell" rating on May 18th. The point & figure chart on GPOR is bearish and forecasting at $36.00 target.

This past week was technically bearish with GPOR's relative weakness and breakdown below support in the $44.00 area. Tonight I am suggesting a trigger to open bearish positions at $42.75.

Traders should note that OPEC does have a meeting coming up next Friday. Their decision on oil production could influence the price of natural gas. GPOR produces both oil and gas but most of its business is natural gas.

Trigger @ $42.75

- Suggested Positions -

Short GPOR stock @ $42.75

- (or for more adventurous traders, try this option) -

Buy the JUL $40 PUT (GPOR150717P40) current ask $1.25
option price is a current quote and not a suggested entry price.

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

Option Format: symbol-year-month-day-call-strike

Daily Chart:

Weekly Chart: