Upping Your Bet on the Biotech Rebound

Last week was a mixed week for global stock markets, with the Dow Jones up 0.93%, the S&P 500 rising 0.37% and the NASDAQ down 0.04%. The MCSI Emerging Markets Index fell 0.63%.

Big gainers in your Bull Market Alert portfolio included Integrated Device Technology (IDTI), which soared 9.14%; the ProShares Ultra Nasdaq Biotechnology ETF (BIB), which gained 4.64%; and MasterCard (MA), which rose 2.48%. The first two of these positions rose above their 50-day moving average and are back to a BUY.

You were stopped out of JA Solar Holdings Co. Ltd. (JASO) on May 6 at $9.90 for a 10% gain. Remember to sell all related options whenever we stop out of a position.

With your May $90 MasterCard call options (MA150515C00090000) set to expire Friday, sell your full options position to lock in a 10% gain.

Hold on to MasterCard (MA) stock for now to pursue additional gains ahead. But raise your stop to $92.75 to lock in at least a 10% gain in the stock.

As you know from your position in ProShares Ultra Nasdaq Biotechnology ETF (BIB), biotech has just experienced one of its periodic sharp sell-offs.

This week’s Bull Market Alert recommendation, Regeneron Pharmaceuticals (REGN), is a bet that this sell-off is now over and that the sector is due for a strong rebound. Here’s why I think Regeneron, a Tarrytown, New York-based biotech company, is poised to move up in the weeks ahead.

First, on Thursday, Regeneron announced better-than-expected earnings on the heels of solid Q1 results. Earnings and sales growth accelerated for the second straight quarter. Regeneron earned $2.88 a share in Q1, up 27% from Q1 2014 and 20 cents above estimates. Total revenue grew 39% to $869.6 million.

Second, the beat came on U.S. sales of Regeneron’s flagship eye drug Eylea, which jumped 51% to $541 million, well above Street expectations for $527 million. The company expects Eylea sales to rise 30% to 35% this year, up from its previous guidance of 25% to 30%. Regeneron noted the importance of a favorable study comparing Eylea head-to-head with rival Roche’s Lucentis and Avastin in patients with a type of vision loss associated with diabetes.

Finally, from a technical standpoint, the stock is part of the biotech group, which, as I noted above, is due for a bounce. Within that group, Regeneron has tremendous relative strength, having held up very well during the recent pullback.

So buy Regeneron (REGN) at market today, and place your initial stop at a wide $405.00.

If you want to play the options, I recommend the August $480 calls (REGN150821C00480000), which last traded at $35.30 and expire Aug. 21.

Portfolio Update

Halyard Health Inc. (HYH) dropped 7.68% after earnings fell short of estimates last Monday. HYH reported $0.51 earnings per share (EPS), down from $1.09 a year ago, vs. the $0.62 average analysts’ estimate. Sales were down 4% to $394 million but beat the $390 million consensus estimate. With the stock severely oversold, I expect a strong bounce in this position. HYH is a HOLD.

MasterCard (MA) rose 2.48% to hit a new 52-week high. Shares were higher at the end of last week on reports that Visa may be in the process of purchasing Visa Europe. Although these firms share the same brand, they are currently wholly separate entities. MA is a BUY.

ProShares Ultra Nasdaq Biotechnology ETF (BIB) gained 4.64% last week. Likely beginning a comeback rally from recent overselling, BIB’s rebound last week moved it above its 50-day moving average (MA). BIB once again is a BUY.

Integrated Device Technology (IDTI) gained 9.14% last week after reporting positive earnings. IDTI reported EPS of $0.29 vs. a $0.26 consensus estimate. Sales revenue was $158.4 million vs. an estimated $158 million. IDTI also moved to a BUY.

iShares MSCI Hong Kong (EWH) dipped 0.67%. China’s central bank lowered interest rates on Sunday by 0.25% to 5.1%. This is the third reduction since November 2014. With Hong Kong and China’s markets deepening their trading ties, what’s good for the goose will likely be good for the gander. EWH remains very close to its 52-week high and is a BUY.

Direxion Daily Small Cap Bull 3x ETF (TNA) added 1.51% last week. This latest recommendation allows you to profit from the weakness in small caps with triple leverage. With some significant technical signals working in its favor, TNA is primed to move upwards. TNA is a BUY.

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