NEW DIRECTIONAL CALL PLAYS

PTC Therapeutics, Inc. - PTCT - close: 64.86 change: +2.48

Stop Loss: 59.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 551 thousand
Entry on April -- at $---.--
Listed on April 04, 2015
Time Frame: Exit prior to earnings in May
New Positions: Yes, see below

Company Description

Why We Like It:
Healthcare stocks have been market leaders but biotechs have sprinted past their healthcare brethren. PTCT saw big gains off its 2014 lows and has continued to outperform in 2015, even after its recent correction.

Here's a brief description of PTCT, "PTC is a global biopharmaceutical company focused on the discovery, development and commercialization of orally administered, proprietary small molecule drugs targeting an area of RNA biology we refer to as post-transcriptional control. Post-transcriptional control processes are the regulatory events that occur in cells during and after a messenger RNA is copied from DNA through the transcription process. PTC has received conditional marketing authorization in the European Economic Area for Translarna for the treatment of nonsense mutation Duchenne muscular dystrophy in ambulatory patients aged five years and older.

PTC's internally discovered pipeline addresses multiple therapeutic areas, including rare disorders, oncology and infectious diseases. PTC has discovered all of its compounds currently under development using its proprietary technologies. PTC plans to continue to develop these compounds both on its own and through selective collaboration arrangements with leading pharmaceutical and biotechnology companies."

You can view PTCT's pipeline data on the company's website.

Most of the excitement for PTCT appears to be focused on its Ataluren drug. It's a treatment for Duchenne muscular dystrophy caused by nonsense mutations. The drug is already approved on a conditional basis in Europe. Right now PTCT is performing a Phase III study. Results are expected in the fourth quarter of 2015. This could be a HUGE event for the company and the stock. Success will likely send the stock soaring while disappointing results could crush shares.

A few weeks ago the stock was rocketing higher thanks to takeover speculation. Analysts were painting a takeover target on PTCT and speculating that Biomarin Pharmaceuticals, Shire, or Vertex Pharmaceuticals might be suitors. It is still just speculation at this point. It would be a big gamble to buy PTCT now before its Phase III study was complete but if you are a potential acquirer then the price will go up if the study is a success.

The Street.com published an interesting note on PTCT's CEO Stu Peltz selling all of his stock in the company (about 47,000 shares). If he believes in the future of PTCT's pipeline, why would he sell? If he believes his company could be acquired by a rival, why would he sell? The other side of the coin is that executives with a lot of stock should diversify their wealth. He does still have stock options but selling his current stake could be seen as a big negative.

Technically PTCT has already seen a -20% correction from its March highs. On the plus side the action over the last two weeks looks like a bullish double bottom. Today the point & figure chart is bearish but a move above $65.00 would generate a new buy signal. The most recent data listed short interest at 14% of the very small 25.5 million share float so PTCT could see some short covering on a breakout.

The long-term trend is bullish and short-term PTCT looks ready to bounce. I want to warn readers that this is a higher-risk, more aggressive trade. We always consider biotech stocks to be higher-risk. The news about the CEO selling his stock generates doubt about the company's short-term future. Cautious traders may want to sit this one out. We're suggesting a trigger to launch small positions at $65.25.

Trigger @ $65.25 *small positions*

- Suggested Positions -

Buy the MAY $70 CALL (PTCT150515C70) current ask $4.50
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:




NEW DIRECTIONAL PUT PLAYS

Michael Kors - KORS - close: 63.39 change: -0.69

Stop Loss: 65.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 3.5 million
Entry on April -- at $---.--
Listed on April 04, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Luxury retail brand names like KORS have seen their stocks get crushed over the last several months. Shares of KORS were big performers for the bulls the first two plus years from its late 2011 IPO. Unfortunately the stock peaked in 2014. Investors worried about over exposure and slowing growth.

According to the company, "Michael Kors is a world-renowned, award-winning designer of luxury accessories and ready-to-wear. His namesake company, established in 1981, currently produces a range of products through his Michael Kors and MICHAEL Michael Kors labels, including accessories, footwear, watches, jewelry, men’s and women’s ready-to-wear and a full line of fragrance products."

Make no mistake, KORS is still growing. Last August they reported a strong earnings report that beat on both the top and bottom line. While management guided lower short-term they raised guidance for 2015. A few months later when KORS reports earnings in November 2014 they beat estimates again with revenues soaring +42% and KORS announced a $1 billion stock buyback program. However, their outlook on 2015 had tarnished a bit and they lowered comparable store sales growth from the high teens to mid teens.

KORS most recent earnings report was February 5th. Earnings per share grew +32%. Their results of $1.48 per share beat estimates by 15 cents. Revenues grew +30.9% to $1.26 billion but that actually missed Wall Street estimates thanks to foreign currency issues.

What troubles investors is the slowdown in KORS' growth. Globally their comparable store sales grew +8.6%. Most companies would probably be excited for that number. Yet analysts were expecting +12.6%. The slowdown appeared to accelerate in North America. Same-store sales plunged from +24% growth to +6.8%. KORS is also facing margin pressure with both gross margin and its operating profit sliding.

KORS management will tell you that the company is doing great and just reported its 35th quarter in a row of same-store sales growth. However, the number crunchers on Wall Street will point out that it was the first time in five years that same-store sales growth did not rise by double-digit percentages.

A big concern among analysts is that KORS could be losing its appeal because it's growing so fast. Last year they added 114 new stores and ended 2014 with 509 retail locations. They're starting to become too common. KORS is losing its cachet.

Management also lowered their guidance for Q4 (current quarter) to $0.89-0.92 a share versus estimates of $0.94. They also see revenues below expectations.

A Credit Suisse analyst is worried that KORS is depending too much on its promotions and discounts to generate sales. Meanwhile a Piper Jaffray analyst just downgraded KORS on April 1st because they see domestic sales sliding sharply with North America comparable store sales falling from 21% to 6% in the last three quarters.

Technically shares of KORS are in a bear market. They also have a bearish trend of lower highs and lower lows. The point & figure chart is bearish and forecasting at $54.00 target. Thursday's low was $63.21. We are suggesting at trigger to buy puts at $62.90.

Trigger @ $62.90

- Suggested Positions -

Buy the MAY $60 PUT (KORS150515P60) current ask $0.95
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: