Seldom do I see such incredible potential in a stock after it pops 50%.
As we now know, the FDA approved Clinical Data's (NASDAQ:CLDA) drug Vilazodone after the markets close 2 Fridays ago, on the 21st of January. (poor option longs on the Jan expiration day!) The significance of the approval, coupled with the potential for this drug in the space it competes, literally catapults this company into the big leagues just as Stepen Strasburg did when he stepped onto the mound for his 1st start for the Washington Nationals last year.
Now, I know, just as Strasburg isn't a Hall of Famer yet, we are talking potential, not looking back in history on a lifetime of outperformance. We can look back though at the entirety of this story and go over the main points which have been covered so well by SA contributors Streetauthority and ME Garza, but I'll limit this to purely the chart/technicals and some option plays.
Just take a look at this chart with the trendlines I have drawn:
Click to enlarge
As you can see, the top of the trendline is around $40 at this time. CLDA has vaulted above the previous trendline and may be making a similar move that it made at the end of 2007.
In 2006 it bottomed at $7.50, hit $15 in mid 2007 and almost doubled again from there, to the $28.73 area by the end of 2007 (It hit $28.63 already.)
These areas are fuel for the next $12 points:
1. Relatively high short interest
2. The potential for this drug vs. it's peers (Low sexual side effects, low weight gain and quicker results)
3. Many other drugs in its space coming off patent
4. Larger Pharma's with cash looking to bolster their pipelines
5. A CEO that has already sold out to another drug company that happens to own over 35% of this one...
To me, this is a perfect storm for future gains and shorts getting squeezed....
Disclosure: I am long CLDA.
Additional disclosure: Long Feb $25 calls and Feb $30 calls