Booking 53.8% Gains in Biotech and Tightening Your Stops

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.
Nevertheless, your Bull Market Alert portfolio had some big winners. New holdings Michael Kors (KORS) jumped 7.02%; CVR Partners LP (UAN) followed with a gain of 6.51%. The ProShares Ultra Nasdaq Biotechnology (BIB) jumped 4.50%; and Novo Nordisk A/S (NVO) added 3.54%.

 
With your $140 call options in iShares Nasdaq Biotechnology (IBB), up 53.8%, sell half of your options here to lock in your gains.
 
Overall, your positions in ProShares Ultra NASDAQ Biotechnology (BIB)Novo Nordisk A/S (NVO) and Standard Pacific Corp. (SPF) are all up by double-digit percentages.
 
Note that you still have big options gains in both American Capital Agency Corp. (AGNC) — up 76.47% — and Standard Pacific Corp. (SPF) — 84.62%. As you know, you’ve also sold half of your options in each of these positions for gains of 76.54% and 61.54%, respectively. But the rule of thumb at Bull Market Alert is to sell your remaining options once they hit triple-digit percentage gains of 100% or more.
 
On the downside, you were stopped out of three positions: 3D Systems (DDD) (for a 24% gain) and Ross Stores (ROST) — breaking even — as well as PowerShares DB Commodity Index Tracking (DBC), at a loss.
 
PowerShares DB Commodity Index Tracking (DBC) was an awkward one. I recommended this last Monday, and you hit your stop by a single penny on intraday trading on Wednesday. At the same time, the position never closed the day below its stop price of $28.20; it never dropped below its 50-day moving average; and the fundamental investment thesis for the position I outlined in last week’s Bull Market Alert is still intact.
 
I would normally recommend that you re-enter DBC — as I have in the past with American Capital Agency Corp. (AGNC) when you were stopped out under similar conditions. At the same time, global markets are still fairly overbought at the moment, and overdue for a more sustained correction. So, let’s just say that I expect we’ll be revisiting this bet on a continued bull run in commodities soon enough.
 
Finally, note that I have tightened your stops in ProShares Ultra NASDAQ Biotechnology (BIB), American Capital Agency Corp. (AGNC) and CVR Partners LP (UAN).

Portfolio Update

Bank of Ireland (IRE) fell 5.90% last week. IRE took a breather after running up to its $6.40 resistance level, a key pivot point in IRE’s 2012 price history. IRE bumped along this level for most of the first quarter, using it as a well-tested support level. Since April, this line has served as a tenacious resistance point. Keep an eye on this price as a break above could spell the beginning of a significant trend. IRE is a BUY.
 
National Bank of Greece SA (NBG) dipped 3.14% last week, after several weeks of huge gains. The European Union (EU) powers-that-be, including Germany’s Chancellor Angela Merkel and France’s President Francois Hollande, made a definitive announcement last night to spare Greece expulsion from the euro zone. This could have a major effect on NBG going forward. NBG is a BUY.
 
Novo Nordisk A/S (NVO) rose 3.54%. UBS upgraded Novo Nordisk from “Neutral” to “Buy” last Friday. This news was enough to push NVO off its 50-day moving average and straight back to its recently tested 52-week high. NVO is a BUY.
 
Standard Pacific Corp. (SPF) added 2.82%. Many homebuilder stocks are up more than 100% over the past year, and SPF is no exception, logging 146% gains so far in 2012. Recently, a homebuilder trade group’s monthly sentiment gauge reflected confidence at its highest level in six years, and confidence continues to shine as evidenced by SPF’s end-of-the-week gains. SPF is a BUY.
 
ProShares Ultra NASDAQ Biotechnology (BIB) jumped another 4.50% last week. ProShares, the provider of the BIB exchange-traded fund (ETF), announced a two-for-one share split last Thursday. The split will apply to shareholders of record as of Oct. 2, and be effective Oct. 4. The split will not change the value of your holdings, and normally will spur significant upside, so long as the bull market in biotech holds up. BIB is a BUY. Raise your stop to $119.50.
 
American Capital Agency Corp. (AGNC) gave back 3.62%. AGNC took a hit last week as Jefferies downgraded the stock. Although AGNC did fall from its 52-week high, it found support (and is rising) from its 50-day moving average. AGNC is a BUY. Raise your stop to $33.00.
 
Seadrill Limited (SDRL) lost 3.59% on news it was executing a corporate restructuring of its drilling rig operations and filing for a $225 million initial public offering. Along with this news came a report of profits rising 5.6% and revenue increasing by 11% for the first half of 2012. Failing to just below its 50-day moving average, SDRL is a HOLD.
 
Michael Kors Holdings Ltd. (KORS) rocketed 7.02% last week as Citigroup reaffirmed its “Buy” rating on KORS last Friday and raised its price target to $68 — nearly 30% above its Thursday closing price! Citigroup made the call on new guidance recently issued by KORS, even stating that KORS could beat those “conservative figures.” More bullish news: Friday’s upwards spike occurred on volume of 10 million shares and KORS’ average volume is closer to three million. KORS is a BUY.
 
CVR Partners LP (UAN) made up for lost time last week, jumping 6.51%, after logging a flat week earlier. UAN powered through its thrice-tested $26.25 resistance level and continued higher on strong volume. UAN is a BUY. Raise your stop to $24.00.
 

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