Happy holidays to everyone,

I wish you all a few quiet moments to share with friends and family this holiday season.

Most of you, like me, spend an inordinate amount of time watching flashing red and green symbols, our heads buried in calculations. And while I love the challenge of the stock market, it can be easy to lose sight of “other” important parts of life.

May this brief pause in the market trading allow you the time and energy to enjoy these other parts.

Look for my 2018 market prognosis next week. I do expect increased volatility in the market, some of which we’ve seen already.

The last two weeks have been quite busy in the portfolio. I suggested booking gains in two retail plays, our Gap (NYSE: GPS) stock position, which rose almost 50% in six and a half months and our Target (NYSE: TGT) call option position which rose 43% in a little more than one month.

Also, I recommended two sets of call option trades; one in the drug group on December 13 and one in the semiconductor equipment group on December 21.

In the semiconductor group, the Applied Materials (NSDQ: AMAT) March 55 calls and the Lam Research (NSDQ: LRCX) February 200 calls are both trading slightly below my suggested entry point, despite the stocks being slightly higher. If you are looking for new options trades in this group, I think these two offer good entry points. (note: please refer to the portfolio page or the alert for this trade for the specific option symbols.)

In the drug group, the Celgene (NSDQ: CELG) March 110 calls are trading 34% below my suggested entry point. As described below, the stock took a hit on some weak data on one of its cancer drugs. Although this is not bullish news, the lost incremental sales from this indication (the drug is already widely used for other cancer types) is not enough to move the needle on profits. I think this is an excellent entry point for these calls.

Both the Bioverative (NSDQ: BIVV) and Emergent BioSolutions (NSDQ: EBS) calls are trading above my suggested entry points.

It is incredibly difficult to time entry points on stocks, particularly at year-end when portfolio managers are jockeying around their positions, so I follow the prices on these options positions very closely. One big day up or down has a magnified impact on options prices.

Look for more recommendations for the general stock portfolio as we enter the new year.

Happy holidays!

Around the Portfolio:

Celgene (NSDQ: CELG) dropped Friday due to a failed clinical trial for an additional use of one of its cancer drugs. The reaction was particularly harsh because management had just reiterated its focus on its cancer drug portfolio at a recent industry meeting.

Brokerage analysts had mixed reactions on the financial implications of the failure. Many did not think the loss of this additional indication would lower revenue growth significantly but a few lowered price targets due to loss of future potential.

The stock is one of the cheapest in the drug group and the company is one of few that is growing revenue and earnings however the stock may be soft due to what analyst Robyn Karnauskas deems a “sentiment hit”.

Jazz Pharmaceutical (NSDQ: JAZZ) filed a new drug application for its narcolepsy drug candidate, JZP-110. Several analysts, including influential analyst David Maris at Wells Fargo, believe the new drug could be quite meaningful. The new indication for obstructive sleep apnea should create a new opportunity for growth of this drug.

Steven Madden (NSDQ: SHOO) had its price target raised to $53 from $47 at Wedbush.  Analyst Christopher Svezia as he believes tax reform is likely to be signed into law and that Steven Madden’s earnings could be significantly higher due to lower taxes.

While I’m always happy to have the targets on our stocks lifted, I don’t view low tax rates as a solid long-term reason for buying a stock. I’ve recommended Steven Madden because of its success in fashion sneakers and its limited exposure to department stores.