Drug Giant Merck defied the naysayers and did as we thought it would back in August when it traded under $26. At $35.50, there has been a snappy almost 40 percent gain. Here’s the chart:

We think it is time to take profits on Merck, as we see the shares pulling back soon. Whether it tests the old high at the blue circle and pulls back or takes it out and pulls back, there will likely be better entry points.

Alternatively, one could put in a stop loss to protect profits, sell a position and spend a small portion of the profits on call options, or simply let it ride–at your own risk.

Results were better than expected and can be viewed here.

Do something. At least sell a few shares. 40 percent in a big cap in less than six months should be your call to action. The company is one bad court decision away from a nasty pullback–and even though we’d likely be buyers at that point, I’d rather have some dry powder to play than not.

Trade Safely.

We’ve covered Informatica both as a stellar company and potential takeover candidate. Yesterday the company posted nifty earnings and the stock is up almost $2 today to just south of $16. Here’s the chart:

Given how well this one has moved, no one would fault early purchasers for taking some cash off the table. Looks like if it can complete a 5/8 retracement of the previous down move, the shares could see $19. or if it gets taken out which seems less likely as time progresses and and the price rises. We’ll keep an eye on it. There are a few expiries for options, but they don’t trade well and have low liquidity which can hammer time value without precise timing. After a run like this, if you purchase INFA here, put in a tight stop loss.

Intel. Got shellac’d (sp?) on the earnings numbers and we felt that a purchase of the April 22.50 calls if they fell to $1 looked interesting. Well, they’re 70 cents a contract now, so either those or maybe the April 20’s might be a good punt for those aggressive traders. Stock acting well even after the earnings and lowered guidance for next year. Might be worth a few calls to ride the (hopefully) bounce.

Picked up Sense Holdings again after not much news through last fall/winter. It’s been busy, though and at 25 cents and a market cap of $8 million, divisions, especially explosives/narcotics/biological detection products look good to us. Low cost units, gobs of potential applications. World’s not getting any safer… have a look at our recent piece.

Finally, Clearly Canadian looks like a portfolio quencher to us. Again, here’s the piece for your background. 80 percent brand recognition, 20 years of innovation in a now $21 billion space, clean balance sheet and decent sales versus market cap. As sales ramp up, should do very well. Currently $2.30 with a market cap of $16 million.

Might be worth having a few shares before they re-establish market share on a shelf near you.

Comments welcome.

Trade Safely.

Looks like it to us. Today’s SmallCap Digest article has our market call, ideas, profit alerts and how to assess a company’s share structure–especially smallcaps. Give it a read.

Here’s the teaser….

The monthly chart denotes a 3/8 retracement of the decline from 2000-2002. Between 2300-2400 the COMP should experience some heavy resistance, which favors the bears. The eventual pullback, however, will give the bulls ammo for some decent entry points. We’re becoming more cautious after a long bull run and want to pick our spots both for individual stocks as well as sectors. As we approach what we think is a top, it would be prudent for investors to lock in profits and be focused on stock selection.

Might be worth having a serious look at the QQQQ March 2006 42 Puts at 55-60 cents a contract as a way to play any short-term weakness or as portfolio insurance. If the market runs a bit higher and the Puts cheapen, groovy…. If the QQQQ drops to 41 relatively soon, the put price will likely double. As we’ve often said, option purchases are risky and only for aggressive, vigilant traders.
Want more? Read the newsletter. Update/profit Alerts for our Elephant trades from December.

Trade Safely.

We posted our views on the NASDAQ in the SmallCap Digest on December 8th. Not much has changed from that view. Here’s the current chart:

I still think we could see the COMP to 2315 as this monthly chart shows a .382 retracement of the decline. As the rally to 2315 hopefully unfolds before running into resistance, buy on weakness and use the 2315 level to start profit taking.

That’s about it.

Novelos roiling…for now.

Recent market weakness, some financing stock coming out and general malaise dropped this one below $2. Here’s the chart:

This one proved more volatile than anticipated, but still extremely confident in the potential. It needs to trade above $3.50 on good volume to reverse the trend. At this point, it may rally to 2.25 - 2.65 before it runs into resistance again. If it can gain some momentum and get to $3.50 on good volume, then the technicals change.

Obviously going to take longer. Look for more 1Q news. Seems a decent spec at this level. Has moved to a Phase 2/3 company and that alone should eventually move it higher as it comes into line with its peers.

Still like it a lot. Would still own it for the long-term and any short term bumps up that come from trials, buoyant biotech sector, and good management execution.

Not Merck-y anymore

Here’s the chart:

We brought this one to the readership as a contrary play in August at $27 and change. Alongside that we noted a coming drug sector rally. Right on both counts.

MRK is up almost 20 percent since our call and we see a rally to $37 and change as possible, soon. That said, the sector is extremely volatile and if you followed us and bought MRK lower, put a stop in to lock in profits. Not a chicken move, just smart. I’m all about protecting profits. As far as the Drug sector, the DRG chart follows:

The drug sector has gained some momentum as the chart shows. We think it could well be gunning for the 2004 high at the blue circle.

We’ll keep an eye on it. Send in any thoughts.

See y’all soon.

Trade Safely….