Think longer term to avoid market volatility. After basing for 10 months Ford could be ready to make a move but there is no sign it will be this week. Postponement of auto tariffs and cancelling steel and aluminum tariffs should help. Mallinckrodt has a world of problems on their doorstep and having a profitable business does not help.
NEW BULLISH Plays
F - Ford Motor Co - Company Profile
Ford Motor Company designs, manufactures, markets, and services a range of Ford cars, trucks, sport utility vehicles, and electrified vehicles worldwide. It operates through three segments: Automotive, Mobility, and Ford Credit. The Automotive segment sells Ford and Lincoln vehicles, service parts, and accessories through distributors and dealers, as well as through dealerships to commercial fleet customers, daily rental car companies, and governments. The Mobility segment designs and builds mobility services; and provides self-driving systems development and vehicle integration, autonomous vehicle research and engineering, and autonomous vehicle transportation-as-a-service network development services. The Ford Credit segment primarily engages in vehicle-related financing and leasing activities to and through automotive dealers. It provides retail installment sale contracts for new and used vehicles; and direct financing leases for new vehicles to retail and commercial customers, such as leasing companies, government entities, daily rental companies, and fleet customers. This segment also offers wholesale loans to dealers to finance the purchase of vehicle inventory; and loans to dealers to finance working capital and enhance dealership facilities, purchase dealership real estate, and other dealer vehicle programs. Ford Motor Company was founded in 1903 and is based in Dearborn, Michigan. Company description from FinViz.com.
Ford shares have stalled at $10.40 after an earnings pop back in late April. Of Friday president Trump cancelled the tariffs on steel and aluminum from Canada and Mexico. That is positive for auto makers. The president also postponed tariffs on cars and auto parts, also positive for automaker earnings.
Ford is spending $11 billion to produce 40 different models of hybrid and electric vehicles by 2022. One of those vehicles is the new 2020 Explorer hybrid with a 500 mile range and a gas sipping 4-cylinder engine to keep the battery charged. Their new vehicle lineup also includes an electric F150 pickup, the most popular truck on the road.
When Ford shares break over the $10.50 level after building a 10-month base, we could see some decent gains. $12 would be the next resistance level. Options ar every cheap but don't expect a sudden surge to $20. Look for a double or triple and then exit.
I am not recommending a long stock position because this could be a slow mover. I would rather use the cheap option where we do not have much at risk in case the stock remains dormant for weeks.
Buy September $11 call, currently 32 cents, no initial stop loss.
NEW BEARISH Plays
MNK - Mallinckrodt Plc - Company Description
Mallinckrodt plc, together with its subsidiaries, develops, manufactures, markets, and distributes specialty pharmaceutical products and therapies in the United States, Europe, the Middle East, Africa, and internationally. It operates in two segments, Specialty Brands, and Specialty Generics and Amitiza. The company markets branded pharmaceutical products for autoimmune and rare diseases in the specialty areas of neurology, rheumatology, nephrology, ophthalmology, and pulmonology; and immunotherapy and neonatal respiratory critical care therapies, as well as analgesics and gastrointestinal products. It offers H.P. Acthar Gel, an injectable drug for various indications, such as rheumatoid arthritis, multiple sclerosis, infantile spasms, systemic lupus erythematosus, polymyositis, and others; Inomax, a vasodilator to enhance oxygenation and reduce the need for extracorporeal membrane oxygenation; Ofirmev, an intravenous formulation of acetaminophen for pain management; and Therakos photopheresis, an immunotherapy treatment platform. The company is also developing Terlipressin for the treatment of hepatorenal syndrome; StrataGraft, which is in Phase III and II clinical development for the treatment of burns; Stannsoporfin, a heme oxygenase inhibitor for the treatment of jaundice; Xenon gas for inhalation; MNK-6105 and MNK-6106, an ammonia scavenger for the treatment of hepatic encephalopathy, a neuropsychiatric syndrome associated with hyperammonemia; VTS-270 that is in Phase III development for Niemann-Pick Type C, a neurodegenerative disease; and CPP-1X/sulindac, which is in Phase III development for Familial Adenomatous Polyposis. It markets its branded products to physicians, pharmacists, pharmacy buyers, hospital procurement departments, ambulatory surgical centers, and specialty pharmacies. It has collaboration with the Washington University School of Medicine in St. Louis. The company was founded in 1867 and is based in Staines-Upon-Thames, the United Kingdom. Company description from FinViz.com.
MNK reported earnings of $1.94 that beat estimates for $1.70. Revenue of $790.6 million rose 4.7% and beat estimates for $766.3 million. They raised their full year guidance from $8.10-$8.40 to $8.30-$8.60.
So why are MNK shares falling to new lows? MNK was named in the latest suit by 44 attorney general as one of 12 companies involved in a price fixing scam on generic drugs. They reportedly inflated drug prices by as much as 1,000%. The case claims the alleged illegal activity was "pervasive and industry wide." A press release on Monday tanked the sector.
Not only is MNK under attack by the price fixing suit but they are involved in eight other specific investigations on generic drug pricing and the persistent opioid drug investigation. They are in serious trouble because regulators and attorneys general don't launch investigations unless they are relatively sure there is cause. I would not be surprised to see MNK in the $5 range as these events heat up.
Buy July $14 put, currently $1.25, no initial stop loss.