Biotech Bounce; 10 Small Caps Under $10 Ready For Liftoff

Biotech Bounce; 10 Small Caps Under $10 Ready For Liftoff

I’m always scouting to for good swing trades and these biotechs seem to be setting up again for another run. Generally I’m looking for a market cap between $50 million and $2 billion with $100 million to $300 million in my wheelhouse and a Beta preferably above 2. The more short interest the better because it provides a solid backstop if the technical pattern is strong and reverses back up the chart. EXEL, TROV, ZLCS, XOMA, DYAX, OSIR, CLDX, ROSG, ARNA and OREX stock are what I’m looking at today.

Exelixis (NASDAQ:EXEL) is a biotechnology company, engages in developing small molecule therapies for the treatment of cancer. EXEL’s stock has a market cap of $646 million and a Beta of 2.77. The short interest is 16 days to cover with 18% of the float short. After a 39% drop EXEL is now oversold just above $4 but does not have momentum under it yet. Look for this one to find support soon and reverse for a possible November FDA panel run. Other than ZLCS, this is my favorite idea once it finds support into November.

Trovagene (NASDAQ:TROV) is a a development stage molecular diagnostic company, focuses on developing and marketing urine-based nucleic acid tests for patient/disease screening and monitoring in the United States. TROV’s stock market cap is tiny at $31 million with a Beta of -1.35. There’s very little short interest to speak of here so don’t look for contrarians to provide a backstop. TROV is down 45% since the middle of July when it peaked investors interest after Altucher’s June article Trovagene: The 1 Stock That Could’ve Saved Steve Jobs’ Life. Given the pullback and story, I’m watching for a move out of oversold as confirmation the downtrend is over.

Zalicus (NASDAQ:ZLCS) is a a biopharmaceutical company, discovers and develops drug candidates focusing on the treatment of pain and inflammation. ZLCS’s stock market cap is right in my wheelhouse at $149 million with a Beta of 2.29. The short interest here in non-existent at 1 day to cover with 2% of the float short. Just before and after a strong Q2 call shares shot up ZLCS shot up to test resistance around $1.43 or 51% off the recent low and now I’d look for a pull to support around $1.20 or $1.10 before the next uptrend which is likely to test the 52 week high of $1.80. This is my favorite on the list.

Xoma (NASDAQ:XOMA) engages in the discovery and development of antibody-based therapeutics in the United States, Europe, and the Asia Pacific. XOMA’s stock market cap is $211 million with a Beta of 2.65. There’s quite a few investors on Wall Street betting against the company with a short interest of 17 days to cover and 15% of the float short. I’m looking at $3 support to hold as confirmation of a turn back up. Shares have been basically sideways since the Q2 call on the 7th.

Dyax (NASDAQ:DYAX) is a biopharmaceutical company, focuses on identifying, developing, and commercializing treatments for conditions identified as plasma kallikrein (bradykinin) mediated angioedema, including hereditary angioedema (HAE), ACE inhibitor-induced angioedema (ACEI-AE), and angioedema. DYAX stock market cap is $245 million with a Beta of 1.13. The short interest here is 14 days to cover and 8% of the float is short. After a healthy 21% pullback I’m watch close because if if $2.27 is the bottom, a move to $2.90 is a lucrative trade from here.

Osiris Therapeutics (NASDAQ:OSIR) is a stem cell company, focuses on the development and marketing of therapeutic products to treat various medical conditions in the inflammatory, cardiovascular, orthopedic, and wound healing markets. OSIR’s stock market cap is $293 million with a Beta of 1.22. The short interest is 12 days to cover with 26% of the float short. After more than a double from $6 to $14.46 in June this is a perfect retracement play off $8.05 support.

Celldex Therapeutics (NASDAQ:CLDX) is a a biopharmaceutical company, focuses on the development, manufacture, and commercialization of novel therapeutics for human health care primarily in the United States. CLDX’s stock market cap is $281 million with a juicy Beta of 2.63. The short interest is 10 days to cover and 11% of the float is short. Solid ascending triangle right off the trendline makes this chart attractive here. With resistance in the upper $5′s the trend is your friend.

Rosetta Genomics (NASDAQ:ROSG) develops and commercializes a full range of microRNA-based molecular diagnostics. ROSG’s stock market cap is tiny at $3 million with a Beta of .55 which explains the massive $1.40 to $23.43 move back in May on smashing volume or a return of $1,574%. Since shares have pulled 83% and while this is a very speculative idea, a tight stop at $4.07 is what I’m watching because the setup is hard to ignore given it had another huge move before the May run back in January of 2012.

Arena Pharmaceuticals (NASDAQ:ARNA) is a clinical-stage biopharmaceutical company, engages in discovering, developing, and commercializing oral drugs that target G protein-coupled receptors in the therapeutic areas of cardiovascular, central nervous system, inflammatory, and metabolic diseases. ARNA’s stock market cap is on the high side for my service at $1.76 billion but it’s still a small cap and delivers big swings which I like. The Beta here is -.35 with very little short interest at 3 days to cover but keep in mind, 22% of the float is betting against this one and speculation that a major pharmaceutical company could be mulling a buyout of the biotech group has shares running hard Tuesday up over 10% as I write.

Orexigen Therapeutics (NASDAQ:OREX) is a biopharmaceutical company, focuses on the development of pharmaceutical product candidates for the treatment of obesity. OREX’s stock market cap $308 million with a juicy Beta of 2.63. The short interest is light at 1 day to cover with 10% of the float short. This was a solid sympathy play back when ARNA received FDA approval recently and it’s turning off $4 support combined with the buyout rumors on ARNA make this a trade to be watching. While I like EXEL and ZLCS and the catalysts they offer, I think they might not be ready whereas OREX here could make a run Wednesday. Last time OREX ran with ARNA head day trader Luke Murray rocked it for $10,000 in less than an hours work.

 

Testimonial

Lost my patience with GLUU. But...made a profit. That's a little less than $2,000 profit in three trades in 10 days. What a ride!~ Dave E.

Comments
  1. Thanks Jason, I`m going to keep my eye on these stocks. I`ve had exel before

    • Anytime Bill 8)

  2. Wonderful article, Jason! On ZLCS- Could you please tell me the pull to support range? (i.e.support around $1.20 or ?). Thanks!
    Quote from article on ZLCS “…now I’d look for a pull to support around $1.20 or $1.20 before the next uptrend…”

    • Thanks Kelly. I meant $1.10 sorry and it’s fixed now. Not sure it gets there but that would be desired entry, especially if we see a pullback in the broader markets.

  3. what about kerx

    • I’ve never had any luck with it… seems all it does is slow 1% moves daily.

  4. I bought 1500 shares as a first zlcs purchase this morning. If I see any downside I will add, otherwise I will let it play out. Thanks!

  5. Trying to learn here Jason, on the pull back of EXEL today to 4.29, was that the entry point you were looking for?

    • Hi Tom, yes just above $4 is where I’m considering entry, but if it breaks there, I’m out until we see it come down to the $3.50 range and curl.

  6. i think i ll buy zlcs tommorow morning too thanks

    • Good luck, looks like a good trade, personally I’m being stubborn waiting for $1.10. Did that on ARNA too though and missed the bus.

  7. i bought 3598 shares of zlcs this morning too, i did some research and i think this was a really good pick, thank u Jason, hold zlcs for atleast about a year right???
    and i also read your article on vrng
    thanks again

    • Hi Mike, I can’t tell you how long to hold a stock sorry. For me I’m a swing trader so I’m in and out in 1-4 days trying to capture 10%. I do have a large cap long term portfolio but that’s still only 2 week to 2 month holds. Good luck on ZLCS, I’m looking forward to buying it soon too.

  8. Hey Mike,
    What do you think of the recent pullback of ZLCS? It hit 1.18 for a brief instant, and leveled off at 1.22 – 1.24, after bouncing back to 1.27 mid morning.

    • Looking into ZLCS today, $1.20 was my first entry target so we are there and now I’m looking to start scaling.

  9. i think i ll hold it for about a year juking, i am never good with these swing trades, i usually wake up after the market closes, but i should have waited a day, 1.18 s whole lot better price, same thing with kcg, i bought it at 3.01 and the next day it was 2:80 or something….
    anyways thank u n good luck guys
    thank u Jason

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