Wednesday was a prime example of the finicky trading environment that we're dealing with these days. The markets spiked at the mid-day point when comments from the Fed indicated that interest rates would remain low until unemployment numbers hit 6.5%, but stocks quickly gave back their gains and traded relatively flat by the market close when projected GDP growth numbers were modestly revised to the lower. Adding to the reversal of the mid-day spike were headlines that started circulating painting another picture of a stark divide between the White House and Congress regarding budget negotiations - as if the daily flip-flop of tone wasn't getting old yet.
The Fed meeting provided a couple of days of distraction, but for the remainder of the year - or until a fiscal cliff deal is reached (whichever comes first) - the markets are likely to trade in tune with whatever the headlines are telling us that day. As the cliff deadline approaches without a deal being reached, however, investors could start bailing out into cash, which could coincide with tax-loss selling and lead to a pronounced drop. If the talks result in a budget deal over the short term, then predictions of a December rally may actually come to fruition.
It's best, in my opinion, to prepare for both eventualities by still playing the trades and keeping a nice chunk of free cash on hand to take advantage of a potential all-out drop. As we await resolution on the cliff, days like Wednesday will make the traders happy.
As those stories continue to play out, here are a few stocks to keep an eye on for the day, if not for remainder of the week...
Shares of Research In Motion (RIMM) began a furious rebound last month when National Bank analyst Kris Thompson revised his price target of the company to $15, up from a previous target of $12, right about the same time Jefferies & Co. also raised its target on RIMM. The move higher and the positive reinforcement from analysts was a clear sign that the company had fallen back into the good graces of investors as the pending release of the BlackBerry 10 quickly approached. Another six percent move higher on Wednesday placed RIMM shares as a clean double since their September lows. Not a bad rebound story. Given that shares have jumped that high so quickly, however, investors may look to take some profit from the table. While the RIMM stock price rebound has been a solid one supported by analyst attention, the company still needs to prove that it will be able to execute a rebound in BlackBerry sales in a tough smartphone market - and that will be no easy task. To do so, RIM is essentially going back to its roots - business enterprise - before all-out targeting the consumer market again. BlackBerry still remains a very popular brand overseas, but it has lost luster in the US with the rise of Galaxy, Android and iPhone technology. Gaining traction in business again could give the company the foundation to launch a revival of its brand. It may be unrealistic to expect this stock to achieve its past highs anytime soon, but a better-than-expected launch combined with some hype may be able to push shares towards the twenty dollar mark, but it'll also be wise to watch out for some profit-taking leading into the close of 2012.
Healthcare, Biotech, Pharmaceutical:
Amarin Rebounds by Five Percent
Amarin Corporation (AMRN) is a company that needs to be watched daily these days, whether it's to play the price swings as a trader or to evaluate every move in what seems to be an ongoing chess game between the company and its potential suitors. Throw into the mix the various media outlets which practically every day wish failure on the company - for the sole purpose of patting themselves on the back - and you've got some drama pretty good drama playing out, probably on par with a Lindsay Lohan night out. Well, maybe not drama that good.
After continuing a drop that began last week when the company announced it would go-it-alone for the Vascepa launch - an announcement that was accompanied by a non-dilutive financing deal for $100 million - AMRN shares rebounded on Wednesday and closed the day up by five percent. The move higher was not accompanied by any major news release, but it could have been a sign that some short sellers are covering in order to take some of their own profits off the table. It may also be relevant to believe that Gilead Sciences' (GILD) surprise buyout of YM Biosciences (YMI) on Wednesday fueled speculation chatter throughout the entire sector, which would immediately bring more attention to Amarin, being high on the buyout rumor list for months.
Also of note, Amarin filed its 8k in reference to the financing deal on Wednesday, too, providing confirmation of the announcement contained in last week's press release. Still, New Chemical Entity (NCE) status for Vascepa is the hot item right now.
Positive Coverage Initiated on TrovaGene
We mentioned TrovaGene Inc (TROV) yesterday as a stock to watch because of its double in price over a relatively short period of time and also the company's pipeline of diagnostic tests that have demonstrated the ability to effectively detect the presence of various cancer types and infectious diseases through simple urine samples. Shares jumped again on Wednesday by over six percent when Aegis Capital initiated coverage of the company with a rating of 'Buy.' The announcement likely attracted some new investor interest as volume jumped to nearly double the daily norm. The encouraging analyst coverage is likely related to the pending commercialization of a few of TrovaGene's diagnostic tests set for 2013, the first of which - a diagnostic able to detect KRAS mutations through urine samples is slated for a January 2013 launch. As another Seeking Alpha author noted on Wednesday, too, TrovaGene's patent portfolio may hold a very significant inherent value in itself, paving the way for more lucrative partnership discussions if the market begins to accept the technology on a broad scale. With commercialization pending over the near term, a growing pipeline of potential and with enough cash on hand to last well into 2013, TROV may have some more room to run. Volume to this point is not on the scale that indicates widespread attention just yet.
Organovo Holdings Holding Steady Through Market Volatility
Another company developing a novel and potentially ground-breaking technology is Organovo Holdings (ONVO). While the markets have been moving significantly higher and lower during over the past weeks in line with the news releases of the day, ONVO has held fairly steady without much fanfare. Volume has been more volatile than price during that time, however, indicating that some investors may be building or consolidating positions in preparation for a potentially active 2013. TrovaGene has developed the NovoGen MMX Bioprinter, a technology that uses live human cell samples to generate 3D "bioprints" of human tissue. Once generated, these 3D prints can then be used as disease models that enable therapeutic drug discovery and development. With the ability to print living tissue in desired shapes and functions, Organovo could potentially put this technology to use in generating organs for patients awaiting transplants, further on down the road. In developing a technology with such scientific implications, Organovo has already enlisted the collaboration of both Pfizer (PFE) and United Therapeutics (UTHR). The evolving relationships of both partnerships will be worth watching moving into the new year as UTHR currently retains the option to acquire a license from Organovo in relation to the results of the ongoing collaborative effort. Such a license - if the option is enacted - would provide Organovo with up-front cash money and a future revenue stream from royalties paid.
Organovo will also, of course, look to bolster its financial position through additional partnerships. Through the Zacks model, such deals could come with up-front money at around a million bucks/per - an increase over the up-front money associated with the Pfizer and United deals - with more significant milestone payments possible and a modest royalty stream on the back end. As of the most recently announced financials, Organovo is sitting on about eight and a half million in cash, leaving the company on track to fund its way through the better part of 2013, assuming the current burn rate continues. While dilutive financing events are always a threat for still-developing companies, investors will also be watching for any announcements of new collaborative efforts that would land immediate, up-front money. Such events would not only provide additional validation of the technology through the partnership itself, but they would also win over investors who are always looking for reasons to validate (or not) a company's management team.
Could be one to keep on the radar for the coming quarters and potentially one to accumulate for the mid to long term on any dips.
Roundup: The mood heading into Thursday's open looks similar to the market close on Wednesday - flat. There will be few distractions from the cliff negotiations moving forward and the markets should continue to trade in tune with whatever Anderson Cooper and gang have to say at any given time. There's likely to be some selling later on in the month, regardless of a deal or not, because whether the politicians acknowledge it or not, some investors will look to consolidate holdings based on planned 2013 tax increases. Maybe the Wilpons can find an outfielder for the Mets as some of those holdings are sold, or maybe we can just suit up Bobby Bonilla and throw him in left, since we're still paying that guy's salary.
Disclosure: Long AMRN.
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