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  • Market Report And Using Attack Capital

    Every weekend we send out a report with philosophy, trading and investing tips, market comments and stock ideas. Make sure you sign up and opt-in Free for our SR membership. Our Premium Service delivers trades to your inbox every week, morning pre market reports daily, long term research reports on Biotech and Tech growth stocks, Email and Text alerts, entries, exits, projections and more!! Join us today at www.stockreversalspremium.com

    SP 500 UPDATE, ATTACK CAPITAL PLANNING, AND STOCK IDEAS!

    Another volatile week just went by but importantly for now the SP 500 climbed back past the 2035 resistance line we had some concerns with. Our trading ranges were pointed out to SRP members as 1985-2035, above bullish and below bearish. The ECB kicked a bond buying program into gear effectively on Thursday that was more than expected, enough to push the market to 2061. We did pull back on Friday though, so expect continuing volatility ahead.

    (click to enlarge)

    To wit, the SP 500 is only up about 3% in the last 6-7 months from July highs. We obviously are in a resting period for the bull market and in a trading range. This causes frustration at times as you can see certain stocks or sectors soaring out of the blue like the Airlines this past week, and others dropping hard and then rallying a week or two later. (Chip stocks a few times, Biotech etc). This makes for difficult trading and even investing or position trading environments. Sometimes, all of the positions you are holding or SRP is recommending and covering are in consolidations with no real net movement. The 5% up move that looks poised to break out, then turns right back down causing more frustration. You expect to hold for the breakout that looks obvious on the charts (NASDAQ:HOLI), and then you get slapped upside the head with a decline on no news out of nowhere. This is the environment we are dealing with right now, so getting Alpha is the key… and also difficult of course.

    It is key during these periods of market consolidation to take profits a little faster on swing positions as your 5-8% gain can disappear quickly and breakouts are few and far between. It is also though a good time to use the downside volatility to your advantage with Attack Capital.

    ATTACK CAPITAL AND CLDN SAMPLE:

    We used some Attack Capital this week at the firm when CLDN dropped once again out of the blue from $18 early in the week to as low as $15.81 on Thursday. Our opinion is we have done the research, we have evaluated the opportunities, balance sheet, share structure, catalysts, management and more. So often you will get these downdrafts that come out of the blue, a waterfall type move over 1 or 2 days. It can happen at anytime with almost any stock in the universe. We always have attack capital (cash) ready to deploy aggressively when we see these anomalies. When CLDN dropped again this week we bought from 17-17.40, then 16-16.40, and then more at 16.73 over a few days. We bought as low as 15.98 and saw 17.20 just 2 trading days later for a 7-8% swing. The bank doesn't pay you 7% in a few days right? So the way we look at big downdrafts in our favorite names is an opportunity to make some interest on our attack capital.

    Attack Capital Planning:

    Mentally we have an image in our mind that as we are adding and (in this case CLDN, the stock, is declining to 17, 16.80, 16.50, 16.30, 16.10 and so forth)… that we are going to earn interest on every dollar we use to buy more stock during that waterfall decline. This is literally how we look at it in our minds so as to have the fortitude to attack with our cash, and not hide in a bunker or under a desk. We assume the stock will head back up at some point from the senseless decline and pay us interest for having the strength to buy. Most waterfall declines are computer generated stop loss selling, margin calls, more stop loss selling, then panic selling by traders. Use it to your advantage, don't panic…

    We also respect the market and do not pretend we are going to pick the exact bottom and plow one big trade of cash in at just the right price. That is not a risk reward metric that works in the market, because most often you will have put your attack capital in all at once, and had you waited one more day you could have picked up more shares much cheaper. When you use attack capital, scale in over many trades over 1-2 days on a decline, never pretend you are smarter than the market or the computers and you can pick the bottom, its not going to happen that often. Worst case you only got a small amount and the stock heads back north, best case you get more shares cheaper lowering your average and making more $$ when the stock reverses. This avoids the common mistake of thinking you are smarter than the market and you plan to pick the exact bottom. More often than not a stock in a sell off declines more than you planned or thought it would.

    There is nothing wrong with then selling some of your stock you bought with attack capital on the way down when the stock reverses back up and banking the gains while holding a core position. In fact, with core long term positions like we have at SRP, it makes total sense to trade around the position a little bit for best results. If you are skilled at it, you can lower your net cost with your trading and maintain that long position for the upside you are projecting. At our firm, we always look for big declines in our favorite names and then we slowly add to those positions as the stock drops, and we keep on adding and adding a little at a time… try it sometime if you can stomach the drop. Dealing with paper drawdowns is mentally tough, but financially rewarding if you have a plan!

    Now on to some ideas for the coming near term environment. We have a list of some stocks that are of interest and may turn into SRP related swing positions or other soon!

    (NYSE:XRS)- Tal Education Group- K-12 Chinese provider of tutorial and educational services. May finally be coming out of a slumber stock wise. We have covered it at SRP in the past.

    (NYSE:IPHI)- Semiconductor manufacturer breaking out

    (NASDAQ:PCRX)- Pacira Pharmaceuticals, breaking out of a multi month base it looks like. The company's current emphasis is the development of non-opioid products for postsurgical pain control, and its lead product, EXPAREL, was commercially launched in the United States in April 2012. EXPAREL and two other products have utilized the Pacira proprietary product delivery technology DepoFoam, a unique platform that encapsulates drugs without altering their molecular structure and then releases them over a desired period of time. Some are calling it a miracle drug and delivery system platform. A break over 110 would be pretty bullish long term.

    (NASDAQ:PRXL)- A move over 65 would break this one out. We have covered it in the past. a Biopharmaceutical outsourcing services company, provides clinical research, clinical logistics, medical communications, consulting, commercialization, and advanced technology products and services for pharmaceutical, biotechnology, and medical device industries worldwide.

    (NASDAQ:AKRX)- Generic Drug maker we have also recently had on weekend lists

    (NASDAQ:RJET) (On last weeks list, rallied big with airline stocks)

    (NYSE:BIN)- Progressive Waste Solutions- New uptrend?

    (NASDAQ:ULTA)- Ulta Beauty supply, we profited from this at SRP not long ago in a swing position, looks like a breakout as they expand into more stores nationwide.

    StockReversalsPremium

    Jan 25 10:15 AM | Link | Comment!
  • ONCS- The 2015 Biotech Breakthrough Stock?

    This is a piece of what we sent our Free members on Dec 17th at 43 cents per share. The stock is now 49 cents up about 14% or so.

    Join us free at stockreversals.com for the best ideas and market face ripping gain potential.

    ONCS- 110 million market cap, 44 cents, recently traded at 62 cents in early December on spate of positive data from trials, partnerships, and more.... has pulled back on likely year end tax and profit related selling. Non-invasive investigational therapies that are designed to destroy solid tumors and metastatic cancer and preserve quality of life.

    The total market cap is 100 million compared to 2.5 billion for Bluebird for example. One of Merck's top scientists who has 50 published peer reviewed white papers left Merck last year to join ONCS as their Chief Medical Officer. We expect at some point they will do a reverse split to move the share price up and get institutions involved.

    The CEO and Founder was a V.P. at INO (Inovio). In recent studies their T-Cel therapies showed complete immune response rates and partial response rates in over 30% of patients. The stock is flying under the radar and though it may take some time to get legs, we are picking up an initial small position and then watching the news closely.

    We are borrowing this 1 Billion valuation analogy (A 10 bagger if so) by a poster who has done his homework. https://docs.google.com/document/d/1aaIQRFno3T5W7PDDsPffAt6v7-SjHUDBziUARVjuevw/edit

    So although Biotech has been hot and could correct hard at anytime, we are living in a great period and T-Cell immunotherapy and CAR-T technologies may be transforming cancer treatment unlike anything we have seen in 20-30 years

    Dec 29 9:56 AM | Link | Comment!
  • CNAT- Emericasan Liver Platform Way Undervalued By Market?

    Conatus Pharmaceutical- $6.58 close of 9/4/14

    September 2nd Updated Corporate Presentation Link

    Join our service for free at www.stockreversals.comBiotech Disruptor Update: Recent pullback provides attractive entry. Targets $12-$19 3-6 month potential. In addition, company is hitting the roadshow circuit today September 4th in front of large investors.

    Recently the valuation and stock price of CNAT has come under a correction mostly due to lack of Top Line phase 2 data we are awaiting, and also we believe a lot of recent confusion related to Corporate filings and recent events and announcements. Our opinion is this confusion and short sightedness amongst investors and traders is giving market participants an amazing lower risk entry point into what could be a 70-200% gainer over the next 3-6 months. We do our best to explain below and will disclose as well that we are aggressive buyers over the last several trading days at 6.75 and below especially due to this opportunity.

    We are big believers in doing the fundamental research, understanding the catalysts for shareholders, and adding to our positions on weakness in our favorite companies. We often mention them on Stocktwits such as BLUE ($23 in May and now nearing $40, TEDU at $9 and ran to $15, LEJU at 12 which ran to 18, and the list goes on. In short, we like misconceptions or laziness by investors that provides us great money making entry points in individual stocks/companies. We think that is the case now with Conatus (NASDAQ:CNAT)

    We had originally written a full report on CNAT as a Biotech Disruptor at $7.70 per share a few months ago. We said a 6-9 month holding period could yield a $12-$30 stock price for upside potential. We compared CNAT with ICPT in the liver treatment space, with Intercept having a 5 Billion market cap and CNAT only 120 million. Now, CNAT is at about 100 million in market cap at $6.50 per share with the recent misconceptions and confusion on filings and other data or lack thereof.

    The stock has been as high as $8.80 and as low as $6.10 per share recently since our report.

    With ICPT moving forward with NASH studies, CNAT traders and investors were hoping for a much faster data release turnaround on NASH studies they are conducting. When they announced a few weeks ago they would delay top line data on their NASH trial into 1st quarter 2015, short term investors sold the stock off. Around the same time as they were filing their 10Q quarterly report as required by the SEC, they also congruently filed a "Shelf Registration" for up to 150 million. This spooked investors and they sold the stock again. A shelf registration is very common in Biotech because due to pending data companies are often locked from offering stock with near term data from trials and or insiders are blacked out. So when a company has a window ahead of top line data coming out, they may file this shelf so they can raise funds easily and at attractive stock price levels.

    Our opinion is that investors who understand the story and what management is doing are not worried, but short term traders are too lazy and they sold on this NASH delay and Shelf news. What we believe is really going on is prudent management of shareholder funds, which frankly the company has consistently demonstrated. They believe the best near term opportunity for shareholders is for them to pursue indications for ACLF or Acute on chronic liver failure. The most direct pathway to a phase 3 trial and FDA approval regulatory wise is to move the ACLF indications up in the cue. To wit, the company has 3 top line data results expected between now and the end of the 4th quarter…and it is these results that we expect could propel the stock much higher. There is an immediate unmet medical need regarding ACLF conditions and management believes shareholders are going to be best served near term going after this area. The company also plans to market for this indication on their own, hence the need at some point to cash up. Our take is management is making a bold chess move that should pay off in a much higher market cap, and then they will raise some funds at much higher prices per share.

    Some have also espoused on Stocktwits that a very recent filing had this actual topline data in it. Nothing could be further from the truth, in fact the filing they just make is an Investor Presentation dated 9/2/14 that they plan to use starting 9/4/14 (Thursday) in front of institutional investors. The SEC likes all investors to have access to the same information, hence the filing. In that presentation, the data that is included is actually as much as 10 years old, and not newly released top line phase 2 trial data. So once again, lack of understanding and confusion has caused the share price to fall recently because some traders thought the company was burying this data and not putting out a Press release. We contacted the VP of Investor Relations on September 3rd and this is what he said:

    The only confusion I've encountered was in connection with a reference to data from a previously completed trial in our About Emricasan Clinical Development section. The referenced trial was completed about ten years ago, before the predecessor company, Idun Pharmaceuticals, was sold to Pfizer. This language has been published and has been included in many of our prior releases for its historical value. We will announce results from ongoing trials when they become available.

    Sincerely,

    Alan Engbring

    We would bring to your attention this quote from The Behavioral Economist in his 8/25/14 Seeking Alpha article which has a $19 3-6 month target on CNAT and updates:

    The company is focused immediately on indications and ailments which allow them to meet two fundamental prerequisites; (1) pursuing regulatory pathways that have clear definitions at the FDA, which increases the probability of late trial success and approval, and (2) focusing on dire illnesses, with the possible consequence of death being front and center, in order to capture the attention of the FDA, enrolled patients, and the medical community. NASH, while enticing and a point of focus, doesn't meet those two criteria, respectively. Thus, the delay of NASH results is a non-issue, whereas the anticipation of top line data later this year from trials such as the pharmacokinetics study in ACLF should be of great interest.

    …It is clear the company is preparing for, what they anticipate to be, positive trial results. After all, each of these existing trials represents a potential indication to pursue at the phase 2b and/or phase 3 levels, and with a registered shelf they are in position to pursue such without delay if applicable. All of these decisions, according to Mr. Engbring, are not only judicious and confident, but also in the best interest of shareholders.

    In summary, we remain very excited about the investment potential for CNAT shareholders and as such, we have been steady buyers under $7 and aggressive in fact recently under $6.75 per share. We believe the combination of short term thinking by traders, misunderstanding of filings and top line data releases (3 due in next 3 months) are creating a low risk entry with massive upside potential.

    Just our opinion, as always… our terms of use agreement always applies to all communications.

    Tags: CNAT, biotech
    Sep 05 10:24 AM | Link | 12 Comments
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