Healthcare Business

The Unusual Suspects (TSN, CSCO, GENZ, ARIA, VHC, XOM, USU, EBAY, FUQI)

It always good to keep watch lists.  There were some key issues over the last week that will have important implications for the coming week (or weeks).  This is definitely the case for Tyson Foods Inc. (NYSE: TSN) and Cisco Systems, Inc. (NASDAQ: CSCO), both on deck for earnings this week.  In biotech land, your two key earnings reports will be in Genzyme Corporation (Nasdaq: GENZ) and Ariad Pharmaceuticals Inc. (Nasdaq: ARIA).  A tiny company called VirnetX Holding Corporation (NYSE Amex: VHC) got itself on the map and will continue to be one to watch.  Exxon Mobil Corp. (NYSE: XOM) and USEC Inc. (NYSE: USU) now both have issues, although for entirely different reasons.  eBay, Inc. (NASDAQ: EBAY) also landed itself on the cover of  Barron’s and Fuqi International, Inc. (NASDAQ: FUQI) scored a different top prize.

We have compiled detailed reviews here for those charts and what to look for in the coming week and beyond.

We saw late-morning Friday that Tyson Foods Inc. (NYSE: TSN) had very unusual call option trading activity ahead of the closing bell.  But the options volume we noted came to only half of what really traded and there were some 22,127 sold of the AUG $12.50 CALLS.  There was also continued interest in the SEPT $12.50 CALLS with what ended being 5,915 contracts.  The prior open interest was only 1,075 of the AUG $12.50 Calls and only 169 in the SEPT $12.50 Calls.  We normally might not care, but with earnings out momentarily it was hard to not notice.  The 2% gain on Friday is probably not very important, but the trading volume of 8.9 million shares is almost twice normal volume in shares per day.  Great catch for us by Joe Kunkle at OptionsHawk.com.

Lastly, there is one more tech giant you will have to put on your screens for his coming week.  Cisco Systems, Inc. (NASDAQ: CSCO) has earnings on Wednesday, August 5.  This stock is at a key juncture right now.  Since early July, this one has run from $18.00 up to $22.00.  Its chart is looking very toppy here.  If you look at our affiliate’s chart from INO.com, you can see that the current share price has a lot of overhang from going back a year where the selling waves came on.  Also on that same chart you might even determine that CSCO stock has been strong enough that it could fall 8% or more this coming week and still have no real damage done to its longer-term chart.  Stay tuned for a more detailed earnings preview this week… The estimates from Thomson Reuters are sure to change, but those are $0.28 EPS and $8.51 billion in revenues.  That would compare to $0.25 EPS and $8.162 billion in revenues in the prior sequential quarter and $0.39 EPS and $10.364 billion in revenues from the year-ago quarter.

Genzyme Corporation (Nasdaq: GENZ) is at a risk of hitting new 52-week lows.  This is on the heels of an FDA re-inspection after notification that all promised actions had not been either fully or adequately implemented at the time of the May inspection.  Full details and analysis are available at BioHealthInvestor .com.  Genzyme closed down almost 8% at $51.89, while the 52-week trading range is $50.05 to $83.97.  Guess where the unusual options activity came in? The August Puts, particularly the AUG $50 PUTS, where more than its entire open interest traded.

What happens when biotech companies start to run out of cash or when their burn rates are too high?  Ask Ariad Pharmaceuticals Inc. (Nasdaq: ARIA)… We pointed out its huge gap up earlier in the week on news, but noted how the company needs cash and needs it soon.  Shares were north of $3.00 on that alert.  A 17% drop on Friday and a few days of selling the gains before that took this one to under $2.00.  We’d be on the look out for a capital raise soon.

VirnetX Holding Corporation (NYSE Amex: VHC) is one of those companies most have never heard of.  That may no longer be the case, particular for investors who tread where others fear… patent and copyright law.  The company announced that the United States District Court for the Eastern District of Texas, Tyler Division, issued its patent claim construction, or “Markman” Order, in the ongoing patent infringement action… That patent action is between it and a small little software company named Microsoft Corporation (NASDAQ: MSFT) .  It said, “In the recently issued Markman Order, the Court adopted interpretations that VirnetX believes are favorable to VirnetX on many of the claim terms that were in dispute in the litigation.”  The volume was nuts on this one and 3.78 million shares traded with a close of $3.00 on a 102% gain.  Believe it or not, this hit $5.00 during the peak of trading before coming back to earth.  We will not endorse the company nor the news, but we’d urge you active traders to put this one on your watch list.  This company just got itself on the map and it is safe to assume that the volume will be high here compared to its old 37,000 average daily volume.

Exxon Mobil Corp. (NYSE: XOM) was the biggest disappointment for the major integrated oil stocks this week.  Its earnings miss was poor and its metrics were all south.  Sure, that happens when its key product, black gold, is down by more than half from year ago averages.  But now Exxon Mobil has a new problem that might make traders take a pause here.  This stock has caused major technical damage to its stock chart after a four-consecutive daily drop in share price to end the week at $70.39.  The key 50-day moving average is just at $70.15, only $0.24 lower than Friday’s close.  If this stock does not hold or if oil decides to roll over in the first week of August, then you can easily see on the stockcharts.com chart that another 2% to 4% downside could be in Exxon’s very near future.

USEC Inc. (NYSE: USU) is going to be a key stock to watch this coming week.  You probably know about its fiasco with the DOE not approving its loan guarantee.  The company wants a revisit on the issue, but we gave it some suggestions in a piece on how to add public and private pressure to score more momentum.  Why you care about this one next week is because the nuclear centrifuge company reported earnings at the unusual time of after the close on Friday.  It also withdrew its annual guidance.  If you look at the long-term chart it does have some support within about 10% lower of its price, but if you look at the chart from our affiliate INO.com then you will see how much damage has been done here.  From here on out, USEC’s stock may trade in some very strange patterns until this issue is resolved.

Publications will also have you watching two key stocks this coming week.  Barron’s decided to cover eBay Inc. (NASDAQ: EBAY) as its cover story.  Despite the 100% rally from lows, Barron’s has the notion that eBay is becoming like Amazon.com, except more profitable and with units like PayPal and Skype being bonuses.  A look at the chart from INO.com here also shows that this stock is very toppy at this point having risen from $16 to almost $22 in July alone.  This might be enough for a 4% to 5% pop in early Monday trading, but this has risen sharply already in July and is up over 100% from the lows.

Lastly, we are told that Fuqi International Inc. (NASDAQ: FUQI) came in as the top spot on the IBD 100 over the weekend.  If you look at the INO.com chart, you’ll see this one has gone parabolic from roughly $3 to $25 of late.  It is also up again even after a recent share sale in a secondary offering.  This company is a designer and producer and seller of high quality precious metal jewelry in China.  Sorry, but widows and orphans might not want to risky their money on this one.

JON C. OGG
AUGUST 1, 2009