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Given the 'crunch time' time status of cliff negotiations, and also given the increasing likelihood that politicians are preparing to actually go over the cliff in an effort to blame each other for any economic catastrophe that might strike, volatility could increase this week as investors look to move away from any investments that could be most hard-hit by the stark tax increases and spending cuts that would result if a deal is not reached in time. It's also about that time of year where many investor start to effectuate tax-loss selling, which could also apply downward pressure to the markets between now and the end of the year, especially in the absence of a cliff deal.
Reports have also circulated over the weekend that even investors who are sitting on profits could be just as likely to bail out of their positions before the end of the year in order to secure paying the 2012 tax rate, rather than waiting for next year when the capital gains and other tax rates are likely to be higher. Such comments may be somewhat unfounded on a large scale and could be a part of fear-mongering on the part of various media outlets, but at the same time many investors - including this guy - believe that the best place to sit out broad market uncertainty is on the sidelines. With each and every day that Washington looks to be at a stalemate, the likelihood increases, in my opinion, that investors will start going to cash - and if that's the case, then we could see red in the ledger during the coming weeks.
If the politicians can get their act together, however, and find common ground that would ease investor worry, then there's no reason to believe that any late-December dive would be more pronounced than normal tax-selling would indicate, unless any agreement comes with enough tax hikes that would lead investors to believe that the consumer will be hamstrung going into 2013.
Apple Drops To 'Bear Territory'
Apple (AAPL): Another two and a half percent drop on Friday left Apple shares down by nearly ten percent for the week and threatened to return the stock to the five hundred dollar mark seen in mid-November before a brief rebound had shares trading towards six hundred bucks just a handful of trading days ago. Speculation behind the drop is plentiful, with profit taking, potential 2013 tax increases and/or concerns about future margins gaining much of the attention, but one trend that cannot be ignored is that AAPL may have officially entered 'bear territory' as the 50-day moving average fell below the 200-day moving average last week. Many chartists view this cross as a bearish sign and if that is in fact the case this time, then investors may see more pronounced selling over the coming weeks since many traders actuate trades based solely on chart information...
Amarin Drops On 'Go It Alone' Strategy For Vascepa
Amarin Corporation (AMRN): Amarin shares dropped by nineteen percent on Friday after the company announced the previous evening that it was in the process of implementing its 'go it alone (GIA)' option in preparing for Vascepa's first quarter commercial launch. As we've previously discussed, new drugs marketed without the help of big pharma often take a little longer to catch on - and some never do - hence the expectations of a drop to sub-$10 prices if the company chose the GIA path; and the quick realization of those expectations once it did. Still, many predict that Vascepa is destined to reach its billion dollar potential and many also believe that a buyout will ultimately become a reality, just not for prices that were previously expected...
Implant Sciences Continues String Of Large Orders
Implant Sciences (IMSC) may have reached a pivot point in its development over the past couple of weeks with the completion of multiple large orders for its Quantum Sniffer (QS) explosives and narcotics trace detector (ETD) units, some of which were destined for various US Government agencies. As mentioned last week, the sales to the US agencies were notable in that no announcement has yet been forthcoming in regards to final word from the US Transportation Security Administration (TSA) on the testing and validation process for the QS-B220. It had been largely assumed that government agencies would not begin to purchase Implant's products until a TSA determination had been known. Since they're starting to buy anyway, investors have taken it as a sign of confidence in the technology and a validation of Implant's potential in the homeland defense and security industries.
The string of large orders continued last week. On Wednesday morning the company announced the sale of another 18 H-150 handheld units to an existing customer in China. As stated in the accompanying press release, Implant has supplied its products to customers in China since 2005. The continuation and growth of these relationships should be viewed as a sign of customer satisfaction and evidence that Implant may be able to survive with international orders alone. Given that IMSC is the only American company in the ETD market at a time when increasing national focus is on supporting US businesses and jobs, however, Implant could be positioned for robust US growth, too, especially with government agencies now jumping on board...
Healthcare, Biotech, Pharmaceutical:
Synergy Pharma Retraces to Five
Synergy Pharmaceuticals (SGYP) was a noted winner for the month of November with an overall price spike of about forty percent. Taking into consideration a mid-month dip to three bucks, however, SGYP nearly doubled in just a couple of weeks time. As discussed at the time, such quick moves in this sector are often followed by retreats in share price as profit-takers transfer some paper gains into actual and the day, swing and momentum traders move on looking for their next quick fix. Last week that retreat in the SGYP share price took effect and shares closed the week at just over five bucks, while slipping below that mark during intra-day trading on Friday.
While I'm always a fan of banking some profits into any significant price gain because the market - and especially this sector - is often volatile and unpredictable, investors should not register last week's pullback as anything more than just that - a pullback. The real catalyst event is still weeks away with the expectations of a Plecanatide Phase IIb/III results release, and it's possible that shares could quickly rebound leading into that event. Should results be positive, then a further increase in price to levels predicted by analysts could be in store. In the meantime, because we've already had one significant price run materialize so quickly, the likelihood for volatility over the coming weeks increases as investors look to re-consolidate positions leading into the main event...
Titan Pharmaceuticals (TTNP): Shares of Titan - which had slipped to trading consistently in the sixty cents range - were thrust back into the ball game in September when the company announced an investment of over four million dollars by a potential Probuphine partner. A long time coming, the deal marked a key pivot point for the company, which had slowly lost the faith of its investors by seemingly stretching out the time frame for landing a partner and filing an NDA for its opioid addiction treatment, Probuphine, for years. With a potential partner on board (a final deal is expected to consummated - or not - by the end of the year) and an NDA filed for Probuphine, as noted in a recent quarterly earnings call, Titan could again be gearing up for prime time. Having rebounded to over the dollar mark again, and looking poised to remain there, TTNP could be positioning for a solid news flow in 2013. An FDA decision on Probuphine could be announced as soon as summer in 2013 and further details regarding the nameless licensing partner could prove another price catalyst.
Lpath, Inc. (LPTN): Recently we discussed the possible near-term catalysts for Lpath, Inc., which included the potential for its partnership with Pfizer (PFE) to grow. While no news on the partnership front has hit the wires since that time, a couple of key events over the past week underscore Lpath's potential in continuing to lead the way in the field of lipid-based therapeutics. This past Monday it was announced that Lpath had ranked "eighth among biotechnology and pharmaceutical companies and 60th overall on the 2012 Technology Fast 500, Deloitte's ranking of 500 of the fastest growing life sciences, technology, media, telecommunications and clean technology companies in North America." The ranking could be considered validation of Lpath's ImmuneY2 platform, with which the company has developed two primary product candidates, iSONEP and ASONEP, which target the multi-billion dollar markets of Wet AMD and cancer, respectively.
Pfizer, as mentioned above, is already partnered for iSONEP and holds a first right of refusal for ASONEP.
Lpath also received a key patent in Europe last week.
Shares traded relatively flat for the week as investors are chiefly looking towards potential trial catalysts in 2013, but with a big player watching - and playing along, as Pfizer is - every item of validation should be considered as a building block, laying the foundation for future collaboration.
Worth keeping an eye on - both for the developing technology and for the potential partnership catalyst to materialize over the short term.
Two of food and beverage industry's leaders made some noise last week and could be noted as decent accumulation picks with an eye towards the mid-to-long term. McDonald's (MCD) pushed the ninety dollar mark again late last week after an analyst at Janney Capital Markets upgraded the stock to a 'Buy.' McD's, as we recall, slipped early in the earnings season as profits shrunk along with growth margins, but barring a major negative Sandy effect, MCD could rebound along with the slowly-rebounding economy, should current overall trends continue.
Yum Brands (YUM), on the other hand, had issued a fairly encouraging report early in the season, leading to a nice price spike, but tempered forecasts in China over the coming quarters led to a ten percent drop in share price. Company officials attempted to reiterate their optimism at last week's shareholders meeting, however, although shares hardly rebounded.
Both have the potential to rebound, given their recent declines, with an eye towards holding a few shares for the long term. The overall state of the global economy can weigh down the industry somewhat, but people will always eat and the low-cost restaurant offerings often do well, even in bad times. That said, the strategy with these may be slow accumulation, for the time being, as the lack of a fiscal cliff deal could lead to a broad market drop in the coming weeks. Stocks such as these that are a part of large funds and/or retirement plans could suffer.
Celsius Holdings (CELH): Another company in the food and beverage industry looking for success in China is Celsius Holdings, although for reasons different than those mentioned above. While MCD and YUM have already dominated their home US market, Celsius has maintained quarter after quarter looking to just hold onto its niche following. Looking to expand internationally, the company announced last month that it had partnered with Shanghai Honglu International Trade Co., Ltd for its first push into the Chinese market. As the economy in China has boomed over recent years, just about every industry has registered pronounced gains, including the weight-loss and healthy beverage category. Celsius looks to capitalize on that trend. With a relatively modest market cap, it wouldn't take all that much success for this company to thrive, a few consecutive quarters of demonstrated growth has been tough to come by with this one. After looking to have finally settled at around the two million/quarter range for revenue, the latest report came in at $1.4, well below investor expectations. A few days of high volume since then could be an indication that some are taking a flyer on the company as others lose faith. Worth watching, as the dramatic percentage swings in this stock in the past have provided ample trading opportunities.
Roundup: The market can go either way these days, but as long as the cliff is still unsettled, chances are better that it'll go down, not up - at least in my opinion. The theme for cash on the sidelines prevails, as any market dip should be looked at as an opportunity to pick of some of those 'watch list' stocks for more attractive prices than for what they had been trading previously. It's also quickly coming into vacation season, especially for Washington where the government all but shuts down for about two weeks, so the news flow may lighten. Politicians, too, play the same games as publicly traded companies do, however, so keep an eye out for those late night, Friday or holiday evening press releases that investors would not want to see during a prime trading session. Nothing good ever comes from them, as they hope you'll miss it. 'Tis the season for friends, family and football, so enjoy.
Disclosure: Long AMRN, TTNP, IMSC, CELH, MCD, YUM, DNDN, SGYP.
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