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Chart of Day: Ocular Therapeutix could begin to run higher

Mar 21, 2016

On July 24, the company faces an FDA decision of Dextenza for the treatment of ocular pain after surgery. After looking into recent Phase III data, we’re encouraged by what we’re seeing well ahead of July 2016. In October 2015, the company announced topline efficacy results from Phase III studies.

As we begin to near July, we expect for shares of OCUL to move higher on the anticipatory news effect that we often see with such FDA decisions.  There are two potential ways to trade this. Consider a position in the underlying OCUL stock up to $11. And, or consider a position in the OCUL September 2016 10 call up to $3. It last traded at $2.60, according to eTrade.

 

Chart of Day: Starwood Hotels Potential Bidding War

Mar 21, 2016

Keep an eye on Starwood Hotels (HOT).

A bidding war could send it even higher than its current price tag of $83.65 – a 42% run off February 2016 lows. It’s up another $3.13 on the day because of it.

Just last week, Anbang Insurance offered to buy Starwood Hotels for $13 billion, in an effort to break up its pending sale to Marriott International for $6.5 billion including debt. Marriott just came back with a bid of $13.6 billion in cash and stock.

It’s very likely that Anbang could come back with an even more attractive offer here. And they have plenty of money to do so. This is the same group that bought out the Waldorf Astoria for $2 billion – the highest price ever paid for a hotel.

If this is the case, and the bidding war continues, call options would be a great way to profit from it. In fact, consider buying to open a very small position (2-4 contracts at most) in the Starwood Hotels (HOT) May 2016 85 calls up to $2.50. These calls are up big today on the latest bid offer… But I believe it could move up even more.

Just be cautious. We’re speculating that another offer could be made.

 

Chart of the Day: Whirlpool Overbought

Mar 15, 2016

Just this morning, JP Morgan upgraded shares of Whirlpool (WHR) from neutral to overweight with a price target of $205. They believe the stock is “attractive on a valuation basis even as it has outperformed its peers in recent months.”

But here’s the problem. JP Morgan is a bit late to the party.

The stock is now up about 40% from its lows. It’s significantly overbought, in our opinion. It’s overbought on MACD, RSI and Money Flow, too. Eventually, it’ll have to come down from such unsustainable conditions… It's also sitting at its upper Bollinger Band with a overbought read of zero on Williams % Range.

Your best bet is to buy to open a put option on WHR and wait.

Consider buying to open the WHR June 2016 165 put up to $9.

Have a mental stop of -35% on the trade.

 

 

 

Chart of the Day: All Eyes on the Fed

Mar 14, 2016

There’s not much action on the markets at the moment. Instead, nervous traders are anxiously waiting on what the Federal Reserve has to say on Wednesday afternoon.

While they’re not likely to raise rates, the Fed is still hell-bent on further rate increases this year to maintain control of price inflation. Rate increases have simply been delayed… and not derailed, even though there is plenty of reason why the Fed should not act to raise rates.

The economy is not as strong as many would have liked. We’re told that unemployment sits at 4.9%. But it leaves off millions that gave up looking for work. Inflation is still not nearing the Fed’s healthy target of 2%. Wage growth remains slow.

There are dozens of reasons why the economy cannot handle a rate increase at this time. They’re the same reasons that existed prior to the December hike, too. And we saw how well that played out with a 2,000-point plunge.

 

Chart of Day: Oil Begins to Slide...

Mar 10, 2016

Oil may have rallied close to 40% in recent weeks...

But there was always a good chance the rally wouldn't last.

One, as we know, there's still considerable supply on the market, and not enough demand to mop it up.  We also have to contend with the idea that the Russia-Saudi production freeze meeting may not take place... especially if Iran is not willing to come to the table. 

At least... that's the fear driving oil lower at the moment.

Even with a freeze from Russia and the Saudis, though, the impact may not be as substanial as many hoped.  In January 2016, the Saudis were only producing about 110,000 barrels per day more than they did in January 2014.  And Russia was actually producing 50,000 barrels a day less than it was at that time, too.

The biggest supply issue comes from the U.S., where we have increased production by 1.9 million barrels a day since 2014.  Iraq has increased supply by 1.7 million barrels.  And Iran could very easily add up to a million barrels a day this year. 

Unfortunately, the U.S., Iran and Iraq have not agreed to a freeze.

Iran has already called the deal ridiculous.  

If oil were to back off back to $30 here, I wouldn't be shocked.  Look for oil put option recommendations if oil begins to really sell off here.

 

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