There is always a trend in the market for negative news headlines to follow beaten down stocks. The "don't kick a person when they are down" mentality does not exist in the equity market.
When a stock is in decline from a combination of weak sector, active short sellers and a juicy story accelerating the decline, we should join the party.
NEW BULLISH Plays
No New Bullish Plays
NEW BEARISH Plays
INSY - Insys Therapeutics - Company Profile
Insys Therapeutics develops and commercializes supportive care products. This includes pain killers for the types of severe pain that can come from cancer and cancer treatments. Their main product is Subsys, a proprietary sublingual fentanyl spray for treatment of cancer pain. They have other products but this is the one taking the heat today.
Roddy Boyd is the "journalist" that took on Valeant (VRX) a couple months ago and crashed the stock from $250 to $80. He has released a new report called "The Brotherhood of Thieves" that takes Insys to task for its methods in getting double the insurance reimbursements than its older competitors.
His point is that Insys "executives pressure employees to develop new ways to mislead insurance companies in to granting coverage to patients prescribed the drug Subsys." He claims he has an audio recording of a meeting where Jeff Kobos, an executive with the company, admitted the company's dishonesty. The tape reportedly highlights "conversational gambits" to deflect pharmacy benefit managers questions.
Insys responded with a press release claiming the report was misleading and unreliable "especially in the light of the biased agenda held by the individuals who made these representations."
I am sure Insys is right to some degree since these short sellers and their supporters do their best to trash the company so they can benefit from the drop in the stock price. However, there has to be some truth to the report or Boyd would be opening himself up to a massive suit for his claims.
For our purposes we want to capitalize on this headline war and make a couple bucks while investors are fleeing the stock.
Earnings are March 1st.
Shares are at a 52-week low and support is about $12.50. I am proposing we short the stock at $16.25, under today's low and target $13.25 for an exit. For this move and timing option prices are too high to recommend an options position.
With a INSY trade at $16.25
Short INSY shares, stop loss $17.65, target $13.00 for exit.
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.