NEW DIRECTIONAL CALL PLAYS

Pacira Pharmaceuticals - PCRX - close: 67.32 change: +1.82

Stop Loss: 61.45
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.0 million
Entry on January -- at $---.--
Listed on January 16, 2016
Time Frame: Exit PRIOR to February option expiration
New Positions: Yes, see below

Company Description

Trade Description:
PCRX delivered a very bumpy ride for investors in 2015. The stock outperformed the year before with +54% gain in 2014. Then sentiment changed last year and by October 2015 shares of PCRX were down -58% for the year and down -70% from its February 2015 highs. Fortunately some strong earnings news and a legal win helped PCRX pare its 2015 loss to -13%. Today PCRX is bouncing from support and looks poised to continue its late 2015 rebound.

PCRX is in the healthcare sector. According to the company, "Pacira Pharmaceuticals, Inc. is a specialty pharmaceutical company focused on the clinical and commercial development of new products that meet the needs of acute care practitioners and their patients. The company's flagship product, EXPAREL® (bupivacaine liposome injectable suspension), indicated for single-dose infiltration into the surgical site to produce postsurgical analgesia, was commercially launched in the United States in April 2012. EXPAREL and two other products have successfully utilized DepoFoam®, a unique and proprietary product delivery technology that encapsulates drugs without altering their molecular structure, and releases them over a desired period of time."

The legal win I mentioned above was a fight between PCRX and the F.D.A. There was a disagreement over how PCRX was marketing its Exparel drug. The FDA argued the treatment was only approved for a couple different types of surgery. The company filed a lawsuit against the FDA in September last year. On December 15th they announced a resolution with the FDA. The lawsuit was dropped and the FDA officially rescinded its warning letter about how PCRX was marketing Exparel. Shares of PCRX soared about 15% on the news.

Some of the volatility last year was likely due to PCRX earnings. The company has beaten Wall Street's earnings estimates in three of the last four quarters. Yet they have missed the revenue estimate twice. At the same time Revenue growth has slowed from +84% to +59% to +25% to +19.6% in the most recent quarterly report.

PCRX did offer some good news this year. On January 7th they pre-warned that Q4 revenues would be better than expected. Wall Street was estimating $67.4 million for the quarter. PCRX is now forecasting +12.2% improvement from a year ago to $69.4 million. They also raised their full-year 2015 guidance.

The stock market's sell-off in 2016 pulled PCRX down toward support in the $60 area but traders started buying the dip in a big way on Thursday. PCRX has outperformed the market the last two days in a row. If this bounce continues it could spark some short covering. The most recent data listed short interest at 23% of the relatively small 33.7 million share float. Another positive is PCRX's point & figure chart shows the bounce off support and is currently forecasting an $83.00 target.

Trigger @ $68.75

- Suggested Positions -

Buy the FEB $75 CALL (PCRX160219C75) current ask $2.75
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:

Point & Figure Chart:




NEW DIRECTIONAL PUT PLAYS

iPath S&P 500 VIX Futures ETN - VXX - close: 26.70 change: +2.41

Stop Loss: none
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 69 million
Entry on January -- at $---.--
Listed on January 16, 2016
Time Frame: To Be Determined, option expiration is March 18th
New Positions: Yes, see below

Company Description

Trade Description:
At the risk of stating the obvious, the last two weeks in stocks have been brutal. Investors have taken a risk-off attitude and sold just about everything. The small cap Russell 2000 index is already down -11% in the first ten trading days of 2016. The NASDAQ composite is off -10%. The S&P 500 has declined -8%.

The new year has suffered a parade of negative headlines from disappointing economic data both in the U.S. and China. China devaluating its currency. N. Korea claiming to have hydrogen bombs (several times worse than normal nukes). Crude oil crashing into multi-year lows. Plus falling sentiment for corporate earnings, which are expected to be negative two quarters in a row.

No one wanted to be long over the three-day weekend, which helped drive stocks even lower on Friday. The S&P 500 dipped to 15-month lows before paring its losses on Friday. The fact that Friday was also options expiration just added to the volatility.

Stocks normally don't move that fast in a straight line for very long. Markets a very oversold and way overdue for a bounce. The rebound could show up this week. One way to play it is the volatility indices. The VXX follows the iPath S&P 500 VIX Short-Term Futures Index. When investors panic volatility spikes but these are almost always short-term events. You can see on the long-term weekly chart below these spikes always fade.

Tonight we are suggesting put options on the VXX to capture the decline as volatility fades again and it will sooner or later. We are betting on sooner. We want to buy the March $23 puts at the opening bell on Tuesday (U.S. markets are closed on Monday). No stop loss just in case there is another spike on Tuesday.

Buy puts at the opening bell on Tuesday, Jan. 19th.

- Suggested Positions -

Buy the MAR $23 PUT (VXX160318P23) current ask $2.22
option price is a current quote and not a suggested entry price.

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

Daily Chart:

Weekly Chart: