Wang’s Happy Trading

Submitted by OptionDragon

The Postal Service - Such Great Heights

There was heavy buying in the Vix calls yesterday that should be mentally noted, if you look at the Vix charts, it looks to trend up possibly from here. Keep an eye on it, it could foretell a possible drop to test the Jan lows of 1300 zone in the S&P.
Last night, Dennis Gartman on Fast Money went bullish on Gold again after being bearish for about 2 weeks. What doesn’t go down due to technicals must go back up after consolidating at this range. The goal to $1000 is on. He also said short GM due to platinum prices and GM has to make millions of catalytic converters which will be more expensive to manufacture.
STV beat and raised and is gapping up. STV reports Q4 EPS 22c vs. consensus of 18c
Reports Q4 revenue $19.7M vs. consensus of $17M. Sees Q1 revenue $15M-$17M vs. consensus of $15.24M. Sees FY08 revenue $79M-$84M vs. consensus of $78.76M.
Also on the China front, WSJ said that a China Telecom consolidation could be announced next month.
“China is expected to restructure its telecom industry, consolidating six state-run operators into three, which each offering a full range of services, and that could open the market to global equipment firms. An announcement is expected in March, according to the Wall Street Journal. In a state-run radio report yesterday, China Mobile Communications (CHL) would merge with China Tietong Telecommunications Corp. China Telecommunications Corp., the parent of China Telecom Corp. (CHA), would take over a wireless network from Unicom’s (CHU) China United Telecommunications Corp. And what’s left of China United would combine with China Network Communications Group, parent of Netcom (CN). Finally, China Satellite Communications Corp. would merge into a state-owned aerospace industry group.”
CNBC just reported that an MBI decision on its AAA rating could come in the next couple days. Again more downgrade talks which if happens would negatively affect the markets. Keep an ear on it.
MT - Deutsche Bank upgraded shares as they believe iron ore prices and the coke integration should help the company outperform in 2008. Target to $90 from $72.
SWIM- owner of Investools beat on earnings, Kaufman Bros. believes the company is performing well and the firm reiterated their Buy rating on the shares. The firm expects the company’s positive trend to continue into this year as its margins stabilize. Its gapping up.
CME/NMX- buyout price for NMX is about $104.25. Speculators should be wary with the regulatory hurdles and possible shareholder disapproval due to the low price of the buyout. New York Post ran the article.
On Closing Bell yesterday FSLR was named as top solar play by Lehman Brothers analyst Vishal Shah with potential to grow its top line greatly esp. with oil prices hitting new highs and low cost structure and ramping production facilities adding to economies of scale. My fav too.
UNFI gapping down heavy due to disappointing earnings and downgrades. WFMI earnings was the tell there for weak earnings.
CLF is gapping down but had good earnings. CLF reports Q4 EPS $1.77 vs. consensus of $1.66
Reports Q4 revenue $782.5M vs. consensus of $768M. It has run significantly into earnings and this could be profit taking, they do have an investor conference coming up.
Trader on CNBC says watch the credit spreads for the key to the markets. He says the bears are confounded at why we aren’t lower from all the bad news. Good point, you would think we would be under 1300 by now but alot of the selling has already happened thus reducing supply. Let’s face it if you were worried about the market you already sold and we still have alot of stocks hovering near ATH highs let alone year highs. Bonds jumped yesterday due to speculation energy profits are being allocated to bonds for safety. Steel and infrastructure plays are still hot due to the ongoing global boom in other area of the world, seen in MT raising prices of steel and iron ore in Europe.
All you hear is confidence or lack thereof, we need confidence to help the market and housing problem, there are buyers but without confidence no one wants to drink the kool aid, the Fed Faucet money is starting to leak through but the banks are loathe to let it go. Mortgage rates still going up.
Long ideas to watch- TLT, VIX, DRYS, STV, CSCO
Short ideas- APOL, HOLX, the market
Not really enthusiastic with these ideas, just want to be nimble today and not really read too much into today’s market due to the fact that it is a Friday. We could see more range boundness today, What Fun!

The biggest story IMO this weekend and today is the upcoming FDA decision on DNA’s Avastin for breast cancer tomorrow. It could come out at anytime. Biotechman is undecided and says that it is really hard to game the government. But gov’t ususally doesn’t like small biotechs and loves big biotechs due to influence and workforce impact. He says its gonna be an approvable letter or outright approval. He says that disapproval is a lower probability. The FDA panel voted 5-4 against approval in December and DNA dropped from $74 to $66 DURING the day. TWO votes in the panel recently tried to change their vote from negative to positive. Disapproval has been slightly priced in due to that drop in December, it should jump slightly(approvable letter) but fly higher on outright approval. Biotechman says that DNA is already being used off label in breast cancer so if they do get disapproval their numbers will be hurt directly. The biggest obstacle with this Avastin trial is that it doesn’t boost survival rates by alot only by a small percentage but it does shrink tumors, so it does work. The question is, is that enough for approval and should doctors, patients be given be choice of treatments esp for a drug that has been proven to work?
DNA volatility flat at 29 into FDA Action on Avastin for breast cancer.
DNA closed at $72.37. FDA action on Avastin for breast cancer is expected on Feb. 23. The FDA’s Oncologic Drugs Advisory Committee rejected Avastin for the use in breast cancer on December 5, 2007. DNA March option implied volatility of 29 is near its 26-week average of 28 according to Track Data, suggesting flat price risk. Option pricing says it won’t be very volatile.
Adam F. of thestreet.com is bullish. The risk is a flatline on an approvable letter.
I think I will play this after the fact which I think alot of people will do the same so the action could be after.
Here are some analyst thoughts:
JP Morgan finds the risk/reward on DNA shares attractive into the Februry 23 PDUFA date for Avastin in first-line metastatic breast cancer. They believe an approvable letter is likely but is largely priced into DNA shares. The stock is Overweight rated.

Happy Hunting and Good Luck. Take it easy this weekend, do soemthing fun and stay tuned for my earnings article over the weekend for next week’s big movers. Thanks for everyone’s support, much love.