Riding bullish momentum or anticipating reversal in HCM PLSE and CLVS? 03-15-2017

Market Analysis

As expected, the Federal Reserve has raised it's benchmark interest rate by one quarter percentage points which boosted the markets to close higher on Wednesday. What took many by surprise is the rate increase wasn't as aggressive as people had expected. Even though there will be two more rate increases this year, it is apparent that the Fed is taking a cautious approach to raising interest rate even though chair Jannet Yellen painted a rosy picture of the economy by stating:

Our decision to make another gradual reduction in the amount of policy accommodation reflects the economy’s continued progress toward the employment and price stability objectives assigned to us by law.

While the majority were expecting gold to drop we witnessed quite the contrary as gold rallied during the close. One such theory is short squeeze due to less hawkish rate hike as explained here.

When an upcoming Fed rate hike becomes highly anticipated, deep-pocketed speculators go long on the dollar and, conversely, short gold,” said Brien Lundin, editor of Gold Newsletter. “When the rate hike actually happens, they close out these trades by selling the dollar and buying gold.”

The leverage ETFs we track & trade (JNUG, JDST, DUST, NUGT) made 25%+- move. Hopefully you were able to participate. In case you haven't read already, here is one such setup we use to trade these ETF to profit consistently.

Trade Recap from last week (03/06/2017)

Let's look at some of the ideas in BioTech sector we talked about in last week's blog post which we thought were good candidates to ride the momentum.

  • AUPH – Aurinia Pharmaceuticals Inc : We found this idea when it was trading at $8 and we thought this would be a good stock to ride up to $9 and $10 with a strong support at $6 if it wants to go there. Stock went as high as $10.50 on Monday 03/13/2017. I opened and closed the position the same day on Friday for a profit.

  • TGTX – TG Therapeutics, Inc. : We said if $12 would hold this would be a strong candidate to go up to $14 or $15. Stock closed on Wednesday at $14.45 which is almost $2.50 profit if you found a good entry. I found an entry during the pull back at mid $11.50 and scaled out of my position at low $14.

  • LJPC – La Jolla Pharmaceutical Company : We thought LJPC was a good candidate to break $36 and if momentum continued it could take out $40. Well, it didn't broke $40 but went as high as $36.71 for two consecutive days. I didn't trade LJPC.

  • WB – Weibo Corporation : Obviously not a Boitech idea, We thought Weibo was a prime candidate to bet against if the downtrend continues as discussed in another blog post. However, we saw a rally on Monday and I took that opportunity to bet against and found an entry with mid $50 as my stop. I'll be looking to see this consolidate and trend downwards and cracks $47 first before heading down to low $40s.

3 possible bullish momentum ideas

Alright, so I've used our prospecting engine in combination of our proprietary gauges to identify these ideas as shown below in the screenshot. We're not going to be talking about TGTX as we've already found the idea last week and put on a trade as well.


PLSE – Pulse Biosciences, Inc

If you've been an investor/trader for a while, I'm pretty sure you've seen a situation when a company crushes earnings but the stock declines or the company misses earnings but the stock keeps floating up? When the big money is moving the market in the direction they want (here is an honest admission), you have to either respect the trend and join it or stay away from it until things change.

PLSE has been bleeding cash for a while now but it has attracted investments from two investors providing cash infusion to help it stay afloat on early February. This is when the stock broke out and has been trending up since then. Even though doom and gloom was predicted for PLSE here on Feb 23 2017 stock has moved up by $7 since then.

If $22 continues to act as a resistance, we will likely see a pull back to $18 (lower channel of the trend), if not bullish continuation is likely. Look for high Berserker score and a rip through $22 in the next few trading sessions if bulls are still in control to join the trend. Note that this stock is currently trading at an all time high and is at a initial stage of their 510(k) submission to FDA so plenty of room to make mistakes to get a 50% hair cut.

CLVS – Clovis Oncology, Inc.

After dropping down to almost low $10 in mid 2016 Clovis has almost made a 500%+ recovery. If you simply look at the past seven months (show below) chart looks gorgeous. Does this has room to continue further? I don't see anything stopping this stock to move up until another major event given how favorable the conditions have been for Biotech this year.

Given the bullish move in the last two days, next stops are $75 and $85 if $65 - $70 support continues to hold and demand continues. I'll be looking for an entry if that's the case.

HCM – Hutchison China MediTech Limited

Clean breakout from $16 after recent analyst upgrade with a price target of $22 leaves us wondering why we don't see a very high volume on such strong price move. Company still has negative earnings. I'm usually skeptic of stocks that move on Analyst recommendations so we're expecting some pull back or profit taking and the stock to trade the range annotated in the chart below before we decide to take a position.


Alright, That's it for now folks. Happy and Profitable trading for the rest of the week!

If you're interested in learning how to find highly actionable trading ideas everyday like the ones in this blog post, sign up for an account at http://buysellshortcover.com, our new idea generation platform. We're currently in open beta and there is no cost for using the platform during this time.

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Image credit - alamy stock photo | disclaimer.

Saadey (साँढे)

compsci background, high perf software engineer by profession, fintech fanatic, entrepreneurial, food lover, soylent, traveler, NBA fan, geek, and avid learner.

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