The First Strategy: Short Term In and Out Technical Trading
Risk: Aggressive with loss of principle possible versus a potential gain that is unknown.
One of the best ways to play biotechs is to understand their schedule. When you have a list like the list above, make a spreadsheet that details the dates when they put out news, release financials, (10-Q’s and 10-K’s), when they promised updates on drug trials, dates when milestones are promised and more. This spreadsheet is to give you a good idea of when it is safe to trade in and out of this stock.
With most pharmaceutical companies that have several phases of drug trials, it is never good to be holding the stock when they put out an update. While they may put out a raving success story, many such releases have so much parsing of words that they have the wrong affect on the investing community. You want to play the anticipation of good news in these stocks.
With so many that are at or very, very close to their 52 week highs presently, this list is unique in that the investors are already excited. Some of these will continue to run in anticipation of the next release or other update. It is no coincidence that this list is out after all of these companies have only recently provided key updates in the last 30 days and are not really expected to put out any official news for at least 30 days.
It goes like this:
- With this strategy you would buy no less than four of these.
- You would pick those that you feel most comfortable with.
- You would decide on your total investment and split it up by the number of these you choose.
- You even go into odd lots if necessary to keep the investments about the same.
- Place an order to buy when you feel the stock is at a relatively stable level. Do so for each.
- Once you get orders confirmed, you should already know what profit percent you want for each.
- I would then suggest putting in a GTC sell order for each to close those positions when they hit the percent gain you desired. Remember the transactional cost in and out.
- As one position closes out with a gain, find a replacement using only the principle you used before.
Get email alerts on news for these companies. Likely you need to set up Yahoo Alerts going to an email address. You are looking for the negative articles and such that someone might put out at Seeking Alpha.
What is the potential to do well?
It comes down to did you pick the right stocks? If you did, this is going to work great. If you picked the wrong stocks, you will lose. You need to investigate the stocks you choose. Understand that in a list like this there are a lot of great reasons to think that each and every one of these is going to do great. The flip side of that coin is that any one of these can have a disaster or a set-back and one press release could wipe out gains and even some of your principle. One bad stock that loses 50% can take away the profits on several others. You much watch the news. You should take modest profits. Most importantly – unless you are certain the company you are in in this sector has positive news for sure (in your eyes), bail out a couple of weeks before it is likely to release earnings or other information. Remember this: These stocks have ALREADY had some great reports from management. People are expecting BETTER in almost all of these cases. That’s why I have timed this list for the first trading day of September.