NEW DIRECTIONAL CALL PLAYS

Gilead Sciences Inc. - GILD - close: 114.22 change: +3.50

Stop Loss: 107.65
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 13.8 million
Entry on October -- at $---.--
Listed on October 30, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
GILD seems to be everyone's favorite biotech stock. I only hear bullish opinions about the future of the company, and for good reason. They have some pretty amazing treatments with products for HIV/AIDS, liver diseases, oncology, cardiovascular, respiratory, and more. GILD has essentially revolutionized how we treat major diseases like HIV and Hepatitis C.

According to the company website, "Gilead Sciences, Inc. is a research-based biopharmaceutical company that discovers, develops and commercializes innovative medicines in areas of unmet medical need. We strive to transform and simplify care for people with life-threatening illnesses around the world. Gilead's portfolio of products and pipeline of investigational drugs includes treatments for HIV/AIDS, liver diseases, cancer and inflammation, and serious respiratory and cardiovascular conditions."

This year everyone has been raving over GILD's hepatitis C treatment called Sovaldi. Hepatitis C is a form of viral hepatitis that causes chronic inflammation of the liver. About 185 million people currently suffer with hepatitis C. Previously the most common treatment for hepatitis C had serious side effects and was less than 50% successful. GILD changed that with their Sovaldi drug that not only treats the symptoms but actually cures the patient. The company has drawn some negative publicity over the cost since GILD charges $84,000 for a 12-week course of Sovaldi in the United States. The fact that 80% to 90% of patients who take Sovaldi are cured is a major milestone.

The Financial Times noted that before Sovaldi the impact of hepatitis C in the U.S. took a heavy toll on the healthcare system. The disease can lead to liver failure and cancer, both of which cost significantly more than Sovaldi's $84,000 price target. Hepatitis C is the leading cause for liver transplants in the U.S., which can cost a minimum of $145,000. One consulting firm estimated that the annual cost of hepatitis C to the U.S. healthcare system was going to surge from $30 billion to $85 billion in the next twenty years. Sovaldi has the potential to change. that.

Stocks move on earnings and GILD has plenty of them. Their Q2 report on July 23rd was a blowout. Wall Street was expecting a profit of $1.80 a share on revenues of $5.86 billion for the second quarter. GILD delivered a profit of $2.36 a share with revenues soaring +136% to $6.53 billion. Last quarter Sovaldi accounted for $3.5 billion in sales. Management issued bullish guidance on revenues and margins.

After the Q2 earnings surprise the market's expectations for GILD were a lot higher this time around. GILD reported earnings on October 28th. They missed Wall Street's EPS number by 6 cents with a profit of $1.84 per share. Quarterly revenues soared +117% to $6.04 billion, which did surpass expectations. Sovaldi sales were a disappointment at $2.80 billion against the street's estimates for $3.1 billion. The EPS number was also negatively impacted by the Obamacare's Branded Prescription Drug Fee.

Most of the analyst commentary on GILD following the third quarter results remain positive. The market is looking forward to GILD's next treatment, Harvoni, which is another drug for chronic hepatitis C infection in adults. Harvoni appears to be off to a strong start, which won FDA approval on October 10th.

Technically shares of GILD have seen a huge rebound from the market-induced October sell-off. A few days ago the stock broke out past resistance near $110 and traders bought the dip. The stock was showing relative strength today with a +3.1% gain. The Point & Figure chart is very bullish and forecasting at long-term target of $159.00.

Tonight we are suggesting a trigger to open bullish positions at $114.45. We'll start this trade with a stop loss at $107.65.

Trigger @ $114.45

- Suggested Positions -

Buy the 2015 Jan $120 call (GILD150117c120) current ask $4.85

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

Daily Chart:

Weekly Chart:


ServiceNow, Inc. - NOW - close: 66.42 change: +1.39

Stop Loss: 63.45
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.4 million
Entry on October -- at $---.--
Listed on October 30, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
NOW is in the technology sector. The company provides cloud-based IT solutions across most of the world. According to the company website, "ServiceNow is the enterprise IT cloud company. We transform IT by automating and managing IT service relationships across the global enterprise. Organizations deploy our service to create a single system of record for IT and automate manual tasks, standardize processes, and consolidate legacy systems. Using our extensible platform, our customers create custom applications and evolve the IT service model to service domains inside and outside the enterprise."

NOW is less than three years old as a public company. Their IPO price was $18.00 and they opened at $23.75 back June 2012. It's been a roller coaster ride for investors but the trend is higher. NOW is one of the fastest-growing enterprise software companies. They're stealing market share from older, larger firms like CA Technologies, Hewlett-Packard, and BMC Software.

NOW is developing a very bullish pattern of strong revenues and raising guidance. The last four quarterly reports in a row have seen NOW meet or beat Wall Street's earnings estimate, beat the revenue estimate, and raise guidance every time.

Their most recent quarterly report was October 22nd. Wall Street expected a profit of $0.01 per share on revenues of $174.4 million. NOW delivered $0.03 with revenues rising +60% to $178.7 million. They added 150 new customers in the quarter, which puts their total at 2,514 clients. Their renewal rate is 98%. NOW raised their Q4 guidance above Wall Street's estimates.

NOW's President and CEO Frank Slootman said, "We had a solid third quarter as we continued to help our customers extend service management across the enterprise. The opportunities for us to expand within IT, as well as deliver value throughout the business, significantly broaden our addressable market and growth potential." Michael Scarpelli, their CFO, said, "Our strong third quarter performance included a record 11 deals greater than $1 million in annual contract value. We also achieved our first quarter of billings greater than $200 million."

Technically shares of NOW have broken out past resistance in the $65.00 area. The Point & Figure chart is bullish and forecasting at $74 target. The highs this past week have been near $67.00. Tonight I am suggesting a trigger to buy calls at $67.25.

Trigger @ $67.25

- Suggested Positions -

Buy the DEC $70 call (NOW141220c70) current ask $2.55

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

Daily Chart:

Weekly Chart: