Questcor Pharmaceuticals was a great short, but now the bears
are running for cover.
The stock lost more than half its value in September after a
professional short-selling firm said the company would struggle to
sell its high-priced H.P. Acthar drug. Our Depth Charge monitoring
program lit up with downside activity
one day before
, reaping huge profits overnight.
QCOR bottomed later that month and has been working its way higher
since. The last earnings report on April 30 missed expectations,
but management reported improving sales for the Acthar product.
Roth Capital reiterated its "buy" rating the next day.
The stock, which had been fighting resistance at its long-term 200-
and 500-day moving averages, paused briefly before breaking out.
It's adding another 8.8 percent to $40.80 in this afternoon and is
up 18 percent in the last week.
Short interest stood at a massive 60 percent of the float on April
30, and those bears have been scrambling to cover their positions
ever since. Today they turned to the option market for protection,
snapping up some 3,700 of the May 39 calls, most of which priced
for $1.95. Volume was almost 10 times previous open interest at the
fix $39 price where they can cover their shorts. The activity
reflects fear QCOR will continue to run higher. Alternatively, the
buyers could be initiating new long positions. (See our
section for the wide range of flexibility afforded by calls and
Total option volume is already 5 times its daily average in the
name, with upside contracts accounting for more than three-fourths
of the total.
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