Opinion: Three biotech companies to watch ahead of earnings

Harry Boxer focuses on Exelixis, ImmunoGen and Impax Laboratories

Here are three biotechnology companies and one services company that are displaying strong technical charts ahead of their earnings reports.

Exelixis Inc. EXEL, -2.49% extended out of its bull wedge consolidation pattern, gaining 88 cents to close at $28.11 on 3.8 million shares traded Monday. That’s the highest price the stock has reached since October 2000. The biopharma stock has gained over 90% this year and has progressed up a clear rising channel in the run-up to the company’s earnings announcement next Wednesday. Short-term target is $29.50-$30.

ImmunoGen Inc. IMGN, -3.47% snapped back Monday to $6.34, up 68 cents, or 12%, on 4.3 million shares traded. The stock bounced off the bottom of its rising channel as well as its 50-day moving average after having pulled back from its channel top in the last three weeks. The move came on no apparent news, although the company announces second-quarter earnings Friday. With continued momentum, price could move up to $8-$10 in the next few weeks.

Impax Laboratories Inc. IPXL, +3.47% is on the move, having recently broken out of a head-and-shoulders bottoming pattern. The stock closed at $18.75, up 60 cents, or 3.3%, on 1.5 million shares traded and no news, and is now up more than 40% off its mid-June low of $13.25. The stock saw large gains last week with news of FDA approval of a generic version of its ADHD drug, Concerta, and expected product launch by the end of 2017. The company is expected to report earnings Aug. 8 before the market opens. The next target range is $20-$23.

Outside of biotech, CAI International Inc. CAI, -2.38% is seeing excellent follow-through from last Friday, when price popped all the way up to a high of $26.12. On Monday the stock gained $1, or 3.8%, to close at a three-year high of $26.93 on 427,600 shares traded. Analysts have dramatically increased earnings expectations for the transportation finance and logistics company in recent weeks, and earnings will be announced this Wednesday after the close. The stock is being traded at some of the heaviest volume this year. Having already blown through significant resistance in the $25-$26 zone, price could easily reach $30 in the near term. The price channel shows that this could be a $40 stock or more in the longer term.

By Harry Boxer

Source: https://goo.gl/hxnn7e

The big stock-market drivers this week: Earnings and central banks

Drew Angerer | Getty Images

Traders and financial professionals work on the floor of the New York Stock Exchange (NYSE).

• Corporate earnings season kicks in this week. Big names on tap include Bank of America, Goldman Sachs, GE and Microsoft.
• Central banks in Japan and Europe will offer insight into global interest rates this week.
• Plus, one long-time optimist about the stock market has turned cautious.

What looked like a robust picture for corporate profits got a little less buoyant last week when big banks turned in reports that left the market disappointed.

But even as financial stocks took a tip at week's end, it really didn't matter: The Dow still gained more than 1 percent for the week as it looks like there's just nothing out there that can stop this market. Perhaps, then, some caution is in order.

Here are the events in the week ahead that investors will be watching:

What's happening in Washington

This week was supposed to be all about health care as Republican lawmakers were expected to present yet another legislative package that would repeal and replace Obamacare. However, Republican Sen. John McCain had unexpected surgery to remove a blood clot from above his eye on Friday. With the vote already tight, Senate Majority Leader Mitch McConnell said a vote would not occur until McCain returns. At this point, it is unclear how long it will take McCain to recover. Some reports suggest it could be a few weeks.

All about earnings

Earnings season picks up this week, so that will give investors something to chew on.

Profit reports from JPMorgan Chase, Citigroup and Wells Fargo left traders with a bit of a meh feeling Friday, but it's otherwise been a fast start to earnings season.

With just a fraction of S&P 500 companies reporting, 80 percent have beaten analyst estimates on the bottom line and a blistering 83 percent have exceeded projections for sales. If you're wondering whether there's hope for this slow-moving economy of ours, that second number should get your attention.

The market sure seems happy so far, with profits overall expected to grow 6.6 percent, according to FactSet.

On tap this week is a slew of companies. Some highlights:

• Monday: BlackRock, Netflix.
• Tuesday: Bank of America, Goldman Sachs, Johnson & Johnson, IBM.
• Wednesday: Morgan Stanley, American Express, Alcoa.
• Thursday: Travelers, Microsoft, Visa.
• Friday: GE, Honeywell.

All around the world

In the U.S. there's not a lot on tap regarding economic news. Of course we all know what that means: More time to watch the salacious headlines coming out of Washington on the Russia investigation and, well, we can only guess what else.

Across the pond, investors will be watching what the European Central Bank — the continent's equivalent of the Federal Reserve — will have to say Thursday about interest rates. Japan's version is the Bank of Japan, and it will release its latest proclamation on Tuesday.

Yes, this stuff is esoteric and not always accessible to the average investor, but what central banks do does matter. Whether they decide to keep policy loose or start tightening will be one of the pivotal factors in determining where markets go.

The last word

QMA is a business of Prudential Financial and its managing director Ed Keon, a frequent guest on CNBC, has been a long-time optimist about the stock market. Lately, however, the firm has turned cautious.

Strategists there offer some words of wisdom this week on why:

"So have equities come too far too fast and are we overdue for a pullback? We think in general the answer is yes. We have not seen a meaningful pullback in stocks in roughly 18 months (during the last China growth scare), when historically the average time between equity pullbacks of 5 percent or more is two to three months. Further, stocks and other risky assets look stretched and somewhat pricey against a very low volatility backdrop. So, we think investors are bordering on complacent and the usual fears of a summer swoon are probably more justified than not this year.

"Currently, we are positioned cautiously and not straying too far from our policy benchmarks in our multi-assets portfolios. We are neutral on U.S. stocks and modestly overweight EAFE (developed markets outside the U.S. and Canada), where we believe valuations are better and earnings still cyclically depressed and thus have more room to run. The euro area in particular is several years behind the U.S. in terms of business and monetary policy cycles and its economic prospects are the best they have been in a decade. The promise of structural reform in France, following the election of centrist reformer Emmanuel Macron in June, is also constructive. But the upcoming election in Italy bears watching.

"While we are wary near term, we do not believe a recession or bear market is imminent, so we are inclined to view any meaningful pullback as an opportunity to add exposure. The bull market is at a mature stage, but we do not believe it is ready to roll over just yet."

So it's basically just a word to the wise rather than a note of alarm. But it's worth noting a cautious tone from a long-term market bull.

By Jeff Cox

Source: https://goo.gl/syf5fb

5 Stocks Set to Soar on Bullish Earnings

Short-sellers hate being caught short a stock that reports a blowout quarter. When this happens, we often see a tradable short squeeze develop as the bears rush to cover their positions to avoid big losses. Even the best short-sellers know that it's never a great idea to stay short once a bullish earnings report sparks a big short-covering rally.

This is why I scan the market for heavily shorted stocks that are about to report earnings. You only need to find a few of these stocks in a year to help enhance your portfolio returns -- the gains become so outsized in such a short time frame that your profits add up quickly.
That said, let's not forget that stocks are heavily shorted for a reason, so you have to use trading discipline and sound money management when playing earnings short-squeeze candidates. It's important that you don't go betting the farm on these plays and that you manage your risk accordingly. Sometimes the best play is to wait for the stock to break out following the report before you jump in to profit off a short squeeze. This way, you're letting the trend emerge after the market has digested all of the news.
Of course, sometimes the stock is going to be in such high demand that you risk missing a lot of the move by waiting. That's why it can be worth betting prior to the report -- but only if the stock is acting very bullish technically and you have a very strong conviction that it is going to rip higher. Just remember that even when you have that conviction and have done your due diligence, the stock can still get hammered if Wall Street doesn't like the numbers or guidance.
If you do decide to bet ahead of a quarter, then you might want to use options to limit your capital exposure. Heavily shorted stocks are usually the names that make the biggest post-earnings moves and have the most volatility. I personally prefer to wait until all the earnings-related news is out for a heavily shorted stock and then jump in and trade the prevailing trend.
With that in mind, let's take a look at several stocks that could experience big short squeezes when they report earnings this week.



Zagg
My first earnings short-squeeze trade idea is mobile accessory solutions player Zagg (ZAGG - Get Report) , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Zagg to report revenue of $82.94 million on earnings of 24 cents per share.
The current short interest as a percentage of the float for Zagg is very high at 15.8%. That means that out of the 26.59 million shares in the tradable float, 4.22 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 6.9%, or by about 272,000 shares. If the bears get caught pressing their bets into a strong quarter, then this stock could easily spike sharply higher post-earnings as the bears scramble to cover some of their positions.
From a technical perspective, Zagg is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending over the last month and change, with shares moving higher off its low of $8.29 a share to its recent high of $10.75 a share. During that uptrend, shares of Zagg have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed this stock within range of triggering a near-term breakout trade post-earnings.
If you're bullish on Zagg, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $10.75 to around $11 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 566,330 shares. If that breakout hits post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $11.76 to it 52-week high of $12.74 a share.
I would simply avoid Zagg or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below both its 20-day moving average of $10.12 a share and its 50-day moving average of $9.91 a share and then below more near-term support at $9.67 a share with high volume. If we get that move, then this stock will set up to re-test or possibly take out its next major support levels at $9 to its 200-day moving average of $8.89, or even $8.29 a share.



Epizyme
Another potential earnings short-squeeze play is clinical stage biopharmaceutical player Epizyme (EPZM - Get Report) , which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect Epizyme to report revenue $570,000 on a loss of 6 cents per share.
The current short interest as a percentage of the float for Epizyme is rather high at 16%. That means that out of the 28.43 million shares in the tradable float, 4.56 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 24.6%, or by about 900,000 shares. If the bears get caught pressing their bets into a bullish quarter, then this stock could easily rip sharply higher post-earnings as the bears move fast to cover some of their trades.
From a technical perspective, Epizyme is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently formed a double bottom chart pattern, after shares found some buying interest at $8.27 to $8.48 a share. Following that potential bottom, shares of Epizyme have started to uptrend and move back above its 20-day moving average of $9.42 a share. That move is now starting to push this stock within range of triggering a near-term breakout trade above some key overhead resistance levels post-earnings.
If you're in the bull camp on Epizyme, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $10.48 to its 50-day moving average of $10.61 a share and then above more key resistance at around $11 a share with high volume. Look for volume on that move that registers near or above its three-month average volume of 652,610 shares. If that breakout fires off post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $13 to around $15 a share.
I would simply avoid Epizyme or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its 20-day moving average of $9.42 a share and below more support around $9 a share with high volume. If we get that move, then this stock will set up to re-test or possibly take out its next major support levels at $8.48 to its 52-week low of $8.27 a share.