Two biotech squeezes that just may have more juice in them. Let’s look at Vitae Pharmaceuticals (VTAE) and TRACON Pharmaceuticals (TCON). (June 19, 2015)
I want to look at VTAE ( NASDAQ:VTAE ) and TRACON ( NASDAQ:TCON ). Look at the similarities and patterns; these are both biotech companies. It was reported on, I believe it was Thursday after hours that they’re both presenting at JMP Securities Life Sciences Conference; that’s on Tuesday.
Typically companies that present at this Life Science Conference, I’m not a biotech guy but I have heard about he JMP Conferences that they have. They typically don’t report when they’ve got nothing to say. Both of these stocks are up. You just need to know this, this is out of a volatility squeeze, decent short interest, but I don’t really know that this is a short squeeze as much as just speculative buying. Only a quarter of a million shares traded but it’s generally pretty illiquid.
So here’s my suggestion, this is a trade, and only a trade. It’s a little reminiscent of Coeur Mining ( NYSE:CDE ), which I was talking about last week; the hapless wonder who sold the July, not the June, the July $6.00 calls for 20 cents. That didn’t work out real well when the stock went as high as 6.35; they basically lost their asterisks on this. Now you can say, “Well yes, but now the stock’s back down to $6.00.”
Okay, well that’s fine. Tell that to the guy who’s down from the money that they took in, which was I think around 300,000, who goes from 300,000 to the good to 300,000 to the bad; that’s a swing of about 600,000. Pretty soon you start talking about real money on that. By the way this trade is over. I know some of our “Stock Market Mentor” members did really well on this, because you guys got it, it was a trade.
There are probably a couple of other things that are more so, but the last thing I would want to invest in right now is a silver mining company, not my deal. If there’s a company that makes ties for those man buns that some of these guys like to wear to look different, maybe that’s something that I would least rather invest in than this company. But I’ll invest in these squeezes all day long, and that’s what you have here.
I would say, and again, I’ll say it one more time, this is a trade, full disclosure, I have not looked at the fundamentals here, don’t really care, it’s a chart. The high here is 16.09. If the stock starts trading above 16.09 you take that thing for a ride. And then you keep a fairly tight trailing stop. Look at it intraday, you can see what happened, look at it, let’s go even on a 60-minute chart, you can see how this thing popped and has then pulled back right into the close.
We’ll just go even in to a 15-minute chart, that is why I say don’t buy this stock now if it opens here on Monday. Don’t buy this stock now because now you’re guessing. Now you’re saying, “Yes but I know the stock is going to breakout.” No you don’t, you might think you do, you might want to. No. You may want the stock to breakout but you don’t get to choose. So you wait. If the stock breaks out above 16.09, now you’ve got a trade. If the stock does not breakout above 16.09, you just had a potential trade that did not give you an entry.
TRACON (NASDAQ:TCON ), in my view a better deal and you know why. This had the big sell-off at the end of the day. This one ( NYSE:CDE ), not so much. So TRACON (NASDAQ:TCON ), lets look at that; also new high, 13.30. You want to see this stock start trading above 13.30, that’s when you buy.
And then again I’ll say it, you want to keep a tight stop because we’ve seen these patterns before, where the stock does this and then it does this, moves up and then quickly reverses and then the following day does this. It’s a fakeout, we see them all the time, a squeeze, a breakout, a reversal and a fakeout and now the stock either stops here and bounces or it just keeps on going.
So the idea is, you want to keep a tight stop after the stock breaks out. Then even though you are quote, “chasing the stock,” you’re chasing it higher and you’re keeping a snug trailing stop on your position. So you should never, I my view, you should never have more than literally 4 or 5 percent risk on this. That’s because it’s that kind of trade; you want to get it while it’s blasting off and then at the first sign that it’s about to flameout you get out. That’s how I would trade TRACON (NASDAQ:TCON ) and Vitae Pharmaceuticals TRACON (NASDAQ:TCON ).
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