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Orexigen Therapeutics (OREX) Gets Hammered On Contrave Rejection

|Includes:Orexigen Therapeutics, Inc. (OREX)
9:05am (EST)

The market managed to hold key support levels at the start of trading on Monday which gave the bulls a little confidence going into the afternoon session.  The indexes were already near their highs as the bulls rode the momentum into the close and got back nearly half of Friday's losses.

The strong showing put a cap on January's gains which was the first time the month has shown positive results since 2007.  This is usually a bullish sign for the rest of 2011 (according to the January Barometer) but history is not always a reliable indicator in predicting market movements a year out as anything can happen.  However, we would not bet against the JB being wrong for 3-straight years.  In 2009 and 2010, January were negative, yet, the market finished higher and it marked the first time ever the JB had been wrong in back-to-back years.

Of course, we covered all of this yesterday but it was nice to see the bullish confirmation which is what we were banking on.  There was a lot of short-covering yesterday and the crisis in Egypt will not be over anytime soon but at some point it will.  Although it feels like the bulls are walking on eggshells, the trend is still higher and the indexes closed right near our targets we were hoping to reach by the closing bell.

The Dow added 68 points, or 0.6%, and finished at 11,891 and just below our 11,900 bounce-back target.  If there had been another 15 minutes of trading we would have nailed it for the judges but we settled for silver.

Go ahead and give us the bronze for predicting the S&P's close.  The index advanced nearly 10 points, or 0.8%, and settled at 1,286.  The high was 1,287 and we were looking for a finish above 1,290.  We were a field goal off which is how many points the Steelers are getting in the SuperBowl.  Bet it.

We scored gold on the Nasdaq's close as the index popped 13 points, or 0.5%, and nestled-in right on our 2,700 target.  Tech traded to a high of 2,706 but the Intel (INTC, $21.46, flat) news ruined the party, to a degree.  Shares did manage to finish even for the day after the stock was halted and showed some resilience which was a plus. 

e wanted to mention Orexigen Therapeutics (OREX, $9.09, up $0.77) this morning, quickly, because shares are getting crushed. The stock is down over 70% this morning after the FDA rejected approval for the company’s diet drug, Contrave. 

We have been following the February 5 puts (OREX110219P00005000, $0.45, down $0.10) for a couple of weeks now on our Watch List but stayed on the sidelines. Although we didn’t pull the trigger on a trade, for those who did, you are looking at monster gains this morning. 

The put options should open near $2.50, or 400% higher, from yesterday’s close and a few of our subscribers have already sent emails this morning thanking us for listing these options. We’re jealous but so glad that they will be ringing the register this morning. 

Of course, we plan on taking more profits over the next week or two as a few of our other trades are showing nice gains while others are gathering momentum. 

Futures are up this morning: Dow (+51), S&P 500 (+8), Nasdaq 100 (+15). We have a lot to cover in our Members Area so let’s get to it. We may also release a new trade this morning so stay locked and loaded.
Stocks: OREX