Saturday, March 01, 2008

Notable Calls Network (NCN): Brilliant trading opportunity in ELN/BIIB

While risking being overly promotional, I wanted to highlight a brilliant trading opportunity that was presented to Notable Call Network (NCN) members this week.

On February 27 just before noon, a NCN member sent me a very good heads up on Elan (NYSE:ELN) and Biogen-Idec (NASDAQ:BIIB) noting that:

- Tysabri linked to 'significant liver injury'.

Apparently the FDA has posted a so called 'Dear Doctor' letter on their website informing physicians of a hepatotoxicity warning and new precautions. The letter warned that Tysabri may cause liver injury and should be discontinued if Jaundice or evidence of other significant liver injury result.

Having been around when the Tysabri concerns surfaced back in 2005, I immediately suspected this would have at least some impact on both ELN and BIIB stock prices so, I distributed the heads-up to other NCN members.

Must say the reaction that followed surprised me.

Both ELN and BIIB took significant hits in a short time frame, falling 2.5 pts (-10%) and 4 pts (-6%), respectively.

The best part is that NCN members had ample time to short both stocks. Even in size, if one had enough conviction.

Once the news hit Bloomberg & CNBC, hell broke loose as you can see from the charts below:

Quite surprisingly, it took the analyst community several hours to respond. While BIIB recovered most of the loss fairly quickly as Tysabri is not considered their main growth generator (as opposed to 2005 when hopes ran high), ELN continued to languish until about 2:00 PM when I got word that Banc of America was out in defense saying the liver news was actually OLD.

According to the firm Tysabri-related liver injury had been previously reported, and were already considered within their valuation. Reports of liver injury were first reported in the addendum to the FDA briefing documents for the July 31st, 2007 Gastrointestinal Drugs Advisory Committee Panel regarding Tysabri for Crohn's Disease.

I couldn't believe my eyes - the stock was still down 8-9%. BIIB was down only 2.5% and now we had a tier-1 firm out saying the news was indeed OLD!

So I disted the defense to other NCN members as quickly as I could.

It took another 5-6(!) minutes before the stock started slowly creeping higher. Must say I performed several sanity-checks on myself during these minutes: Went back and re-read the BofA note over and over again thinking I had missed something. But there it was - old news!

The stock slowly moved higher over the next 10 minutes (60-80c) or so and once the FDA's spokesperson confirmed via Reuters that the news was indeed old, the stock shot up another 1.5 pts giving us a nice gain of 2+ pts.

I think this continues to show how valuable tool Notable Calls Network (NCN) has become in a relatively short period of time. Trading is all about flow and we sure get some good flow.

Currently, about 1/3 of the 40+ NCN members actively share flow with the rest acting as the silent majority. I would hereby like to encourage the other 2/3 to more actively share their flow as well. I know many of you are privy to great info. Remember, NCN is all about synergy!

Together we can make NCN a true market force.

Want to be part of NCN?

It's easy. Just shoot me a brief email that includes a short description of yourself and your AOL nickname.

Please do note that contacts via IM are limited to people with:

- 3+ years of trading experience

- Access to quality research/analyst commentary

- Ability to generate and share (intraday) trading calls

I will not accept contacts from purely technically oriented traders, penny stock fans or people who have less than 3 years of experience in the field.

PS: Some of my calls over the past weeks have been for sh*t. I have gotten some negative feedback from NC readers lately and I must say most of it is justified. I don't know why but I have been somewhat out of touch with the market lately.

I've been in this game for a long time and so have many of the high profile traders I talk to. Most agree with me - things have gotten way tougher over the past months. One person I talk to daily that has been trading for 20+ yrs told me this is the toughest market he has seen. Think this says a lot.

Anyway, I will continue trying my best.



cramermutebutton said...

way WAY early on this one. NCN one of the best communities i've been involved with in the past 15yrs. no BS given, no BS allowed.

It is not necessarily the news that is given, its what you do with it. and these guys have a perspective that only experience can bring.

Financial Planner said...

Maybe the market seems harder, because a lot of the good sell-side analysts have been moving to the buy-side and so whats left has to compete with the buy-side and traders who use he sell-side research as well.

Student_Of_The_Trade said...

I don't want to exaggerate the potential benefit to the NCN of the following suggestion, so please take it with a grain of salt.

If 2/3 of the NCN currently just "lurks"....then what's the harm of a few (thousand) more lurkers?

How about a two tiered subscription service for access to the NCN chat transcript. The top tier would get real time access....the lower tier would get delayed (perhaps "x" number of hours, end of trading day, etc.) access to the same NCN chat transcript.

Neither subscription would include rights to participate in the NCN chat, so they are both only "lurker" as to keep the signal to noise ratio in the NCN chat high.

Clearly, I'm biased in my opinion that this is a good idea.....since I'd gladly pay (the higher tier cost) for access.

Either way....thank you again for your continued efforts with your blog.



cramermutebutton said...

to financialPlanner: Generally I have found that now that sellside research can't "officially" be compensated by investment banking revenues... you have a situation where firms won't pay up for good research analysts any more.. Thus, the good ones get recruited away to hedge funds for big signing bonuses, and the mediocre ones continue to work at sellside shops destroying their clients. NOT always the case of course, but until proven otherwise.. this is the way i view most sellside research.

Therein lies the value of NC; knowing who to listen to, and who to ignore, an perhaps just as important... who to go against.