Good evening. It has been a challenging couple of weeks. After a superb run the last half of June this month has been difficult to figure out this market. The market just doesn't appear to be ready to move lower just yet. I've been spending a lot of time researching and have many set-ups in the pipeline that are going to get us back on track. Many of the companies are about to report earnings so we'll have to wait and see how traders react to those reports. I like the two plays below and am confident we will be able to book gains. Please email me with any questions.
NEW DIRECTIONAL CALL PLAYS
Human Genome Sciences - HGSI - close 25.82 change +0.70 stop 23.95
Human Genome Sciences (HGSI) is a commercially focused biopharmaceutical company. The Company has three products in late-stage clinical development: BENLYSTA for systemic lupus erythematosus (SLE), ZALBIN for chronic hepatitis C, and raxibacumab for inhalation anthrax. In July and November 2009, the Company reported that BENLYSTA successfully met its primary endpoints in two Phase III clinical trials in patients with systemic lupus. In March 2009, the Company reported that ZALBIN successfully met its primary endpoint in the second of two Phase III clinical trials in chronic hepatitis C. HGS submitted a biologics license application (BLA) for ZALBIN in the United States in November 2009, and Novartis submitted a marketing authorization application (MAA) under the brand name JOULFERON in Europe in December 2009. The Company received confirmation from the United States Food and Drug Administration (FDA) in February 2010, that the BLA submission was accepted for filing.
Target(s): 26.60, 27.05, 27.55
Key Support/Resistance Areas: 28.00, 27.10, 26.60, 25.00, 24.25
Time Frame: 1 to 2 weeks
Why We Like It:
HGSI broke and closed above its primary down trend line that began on 4/13. The stock has made a higher low and has convincingly broken above its 20-day and 50-day SMA's. I suggest we initiate long positions on weakness in the stock. I expect a pullback somewhere between $25.50 and $25.10. Officially, we'll use $25.50 as a trigger with a stop at $23.95 which is below the upward trend line and the 50-day SMA. I believe HGSI should trade up to its 200-day SMA near our second target of $27.05. Our first target is $26.60 which can be used an area to begin tightening stops.
Suggested Position: September $26.00 CALL, current ask $2.25, estimated ask at entry $2.08
Entry on July xx
Earnings Date 8/4/10 (unconfirmed)
Average Daily Volume: 1.0 million
Listed on 7/24/10
ProShares UltraShort 20 YR Treasury - TBT - close 36.42 change +0.79 stop 34.25
ProShares UltraShort 20+ Year Treasury (the Fund) seeks daily investment results that correspond to twice (200%) the inverse (opposite) of the daily performance of the Barclays Capital 20+ Year U.S. Treasury Bond Index (the Index). The Index includes all publicly issued, the United States Treasury securities that have a remaining maturity greater than 20 years, are non-convertible, are denominated in United States dollars, are rated investment grade (at least Baa3 by Moody's Investors Service or BBB- by Standard & Poor's (S&P)), are fixed rate, and have more than $250 million par outstanding. The Index is weighted by the relative market value of all securities meeting the Index criteria. The Fund takes positions in securities and/or financial instruments that, in combination, should have similar daily return characteristics as â€“200% of the daily return of the Index. The Fund's investment advisor is ProShare Advisors LLC.
Target(s): 37.50, 39.40, 40.50, 41.95
Key Support/Resistance Areas: 42.00, 41,00, 39.70, 38.25, 37.55, 34.65
Time Frame: Several Weeks
Why We Like It:
I think bonds are way overvalued and are due for a correction. TBT is an leveraged inversely correlated instrument. Typically bond prices move opposite of stock prices, i.e. as the stock prices decline prices of bonds generally move higher and bond yields move lower, and vice-versa. So a long play in TBT is a bet that bond prices will decline and bond yields will rise which means that money will be flowing out of the bond market and probably into the stock market. In general, bonds are slow movers so TBT gives you more bang for your buck and is highly liquid with average daily volume of about 8 million shares. TBT mad a double bottom on 7/1 and 7/21 and I believe it is poised to move higher. The ETF closed above its 20-day SMA and a prior resistance level at $36.30. TBT has a downtrend line to deal with but I am not expecting it to experience too much trouble here. Our immediate target is $37.50 which near a prior resistance level and just under the ETF's 50-day SMA. TBT will probably find resistance there and when it finds its footing and moves higher we will have a reference point to trail the stop higher. My intention is that this trade could last several weeks and I think TBT could make a run up to its October 2009 lows which is near $42.00. Interest rates are at all time lows and I just don't see them going any lower which will bode well for a long position in TBT. Our stop is $34.25 which is below the YTD lows. NOTE: If there is weakness in equities early this week TBT will probably pullback so patience is most likely needed. A lower entry could be considered in the $36.00 area but I'm not certain we will get it.
Suggested Position: September $37.00 CALL, current ask $1.23
Entry on July xx
Earnings N/A (unconfirmed)
Average Daily Volume: 3.8 million
Listed on July 24, 2010