Steer clear of Entegris, Avanir Pharmaceuticals, Poniard Pharmaceuticals, and Newcastle Investment Corp. for the time being.
Some stocks are looking particularly vulnerable right now, if not downright bearish. Take Poniard Pharmaceuticals, Inc. (OTCPK:PARD), Newcastle Investment Corp. (NCT), Entegris, Inc. (NASDAQ:ENTG), and Avanir Pharmaceuticals (NASDAQ:AVNR) as an example. Though each has made tremendous gains recently, the weight of those gains is starting to take a toll. All four represent downside opportunities.
Though a few stragglers are still stepping into Newcastle Investment Corp. (NCT) positions, the party looks like it ended a few days ago. The high-volume day on the 14th carried the stock to new multi-week highs, but even later in that particular session it's clear the profit-taking effort was already in play. Since then, NCT has been unable to get anything going.
Though the expectation is for a pullback, it may be worth waiting to see if $1.21 breaks down as support; that's been the low trade for Newcastle Investment shares over the last three days.
NCT rallied in front of the REIT's second quarter earnings. The company lost $0.90 per share, which was considerably better than the loss of $2.10 analysts were expecting. Unfortunately, Newcastle Investment isn't expected to turn a profit this year or next, which can quickly quell the buying euphoria.... a 'less bad' proposition is still bad. In fact, it's running on fumes at this point.
Most of the semiconductor and semi-related stocks started to roll over last week, and Entegris, Inc. (ENTG) is no different. In fact, as it stands now, ENTG shares are on course for their second weekly loss.
Though the bearish momentum is anticipated to accelerate, there's a potential trump card for the pullback in the form of a major support line extending back to March. In fact, though well overbought, it may be best to wait and see if that support level cracks. If it does, there's a huge amount of downside potential for ENTG.
One thing the bears have working for them... Entegris isn't expected to post any quarterly profits this year, and next year's earnings-per-share is forecasted to only be $0.14. Though the stock's been rising on the hopes of a broad economic recovery, the free ride should be coming to a halt soon.
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Poniard Pharmaceuticals, Inc. (PARD) had been going strong, more than tripling in value since March. In fact, the momentum was so solid, it looked like the bullish gap from July 1st was going to remain unfilled.
On Wednesday though, things changed for the worse for Poniard Pharmaceuticals. It wasn't so much that a short-term support line was broken... it was that it was broken on such high volume. There's no relief or bounce-back effort today.
In retrospect, one has to look back on the PARD chart and wonder if that early July gap was just the beginning of a drawn-out blowoff top.
At the very least the gap at $6.19 should be closed. However, the kind of bearish momentum and worry such a move would create is apt to jump-start a much bigger wave of selling.... perhaps down to the $4.00 area, where Poniard shares found support in June.
The strength of the selling immediately after Avanir Pharmaceuticals (AVNR) was catapulted to $4.00 in early August is alone enough to indicate that the sellers have taken over. It just so happens that the downward move also broke a key support level.
The surge from the 11th was the response to some encouraging news about a neurological drug that Avinir Pharmaceuticals is working on.
Zenvia, currently in Phase III trials, reduces unprompted emotional outburst by 47.2%... as it was intended to do. The efficacy wasn't a problem, but the FDA was concerned that one of Zenvia's ingredients - quinidine - could pose a heart risk to its users. As it turns out, the drug is safe enough to merit its use. Thus, the one-day wonder rally.
Clearly many investors took the move as an opportunity to get out of AVNR shares rather than as a reason to get in. Funny thing about those tidal turns though.... they can stay in motion for longer than anybody expects.
And, that breakdown appears to have gotten rolling, as the market is digesting that fact that there still won't be any profits for at least a couple of years. There's still no clear target level yet for Avinir shares yet though.
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