11/15/14 Speculative Small Cap Stocks-Stay Away Unless Your Are A Trader
Nice profits were booked on our recent small cap picks but today the sell-off was “pronounced”:
Celldex (CLDX) was down 21% to $13.10 after hitting a high near $18 on October 31.
GlycoMimetics (GLYC) was up 2.14% to $7.62 more than 15% above our initial recommendation at $6.74.
Pacific Biosciences (PACB) was off 3.5% to $6.34 after hitting highs of $6.80 on October 31.
Volatility like this over two weeks means take profits when you can. The IWM is still favorable off its October 15 low holding at $116.
10/28 Rallies Rule
Small caps on fire with IWM up 2.58% to 113.58.
NASDAQ in fourth day of rally from 10/23 bottom.
Small cap speculative picks are all up from 10/16 : Today CLDX up 9.34%, PACB up 0.8%, XBI up 2.4%.
And the biotech rally is very broad:
Rayno Large Cap Biopharma: up 33.6% YTD.
Rayno Mid Cap Biopharma: up 17% YTD.
10/22 Update …Jittery Market…red crush at close
NASDAQ at 4382 IWM at $108.90
The small caps made some nice moves over 5 days with the IWM up 5% but the winning streak ended after 4 days. A slide in crude to $80.33 as supplies swell and a 1.67% decline in energy stocks curbed buyer sentiment. Market reversed to downward course at 11am as news of Ottawa shootings came out. Biotechs were mixed-Biogen Idec (BIIB) was down 5.4% due to worries about side effects from their Tecfidera drug.
Update at Close: 10/16 PM
Lots of green in biotech. All ETFs were positive. This sector was first to bounce on Wednesday.
IWM Russell 2000 holding at $107.80. Look for 5 day trend and another bounce off a weak day.
Speculative group du jour-Ebola stocks: CMRX, IBIO, NLNK, SRPT,
New speculative ideas were all up (see below) :
Celldex Therapeutics (CLDX) up 3.17% to $15.30, FibroCell Science Inc. (FCSC) up 6.9% to $2.93, GlycoMimetics, Inc.(GLYC) up 12.7% to $7.14, Pacific Biosciences (PACB) up 5.35% to $5.51. XBI was up 2.87% to $156.59.
So if this trend holds we are in position for an October-January life science AND small cap rally. If IWM and XBI fail to hold bottom then we need a fresh look.
Wild Times Evoke Market Volatility
Amidst the free fall in the S&P and Dow at the opening yesterday I was surprised to see many small cap and tech stocks in the green. The primary action in the market is connected to macro concerns about global growth and the constellation of bad news-Ebola, oil crash, ISIS, economic data,- and now inversion deal potential reversals (ABBV). The vicious selloff in the market coincides with a drop in crude and energy stocks as well as flight to safety. Moreover financial pundits often refer to unwinding of hedge fund MACRO trades like long energy and short treasuries exacerbating the free fall. The Ten Year Treasury yield has fallen to below 2% from 2.6 pretty much tracking the fall in the S&P! The long bond is now up about 19% in 2014 compared to a flat equity market.
Look For A Q4 Rally in Small Cap Biotechs
Small cap biotech stocks brought in bids today and we are compiling a watch list for potential Q4 gains. Before a rally begins we need to see a bottom in the iShares Russell Index ETF (IWM) and maybe even the iShares Micro Cap Index (IWC) up 1.2% today at $69.15. The IWM turned around mid-day yesterday and is up again today to $107.40 and the bottom this month is around $104. The IWC was also up 1.29%. We were “snookered” by a big move in August that did not last but there is a lot of money driving some of these stocks and the overall market damage has been hedge fund related liquidation outside biotech and small caps. But today our index of 50 small and mid-cap biopharmaceutical stocks lit up in green with many 5%+ movers. The XBI was up 3.5% yesterday and many small and mid cap Rayno Life Science stocks are green again today.
We still recommend a core position in large cap biopharmaceutical stocks.
Here is a portfolio under development for Q4 gains. These are all speculative stocks, almost at venture capital valuations but have shown potential in rallies and have met our model criteria. Keep them in your tracking system along with other small cap life science stocks you own. They are not currently the complete list of Rayno Life Science stocks previously published.The XBI is an ETF.
- Celldex Therapeutics, Inc. (CLDX) at $15: focused in immuno-oncology with a pipeline of 5 immuno-therapies.
- Fibrocell Science, Inc. (FCSC) at $2.70: cell therapy for skin diseases using fibroblasts; personalized medicine.
- Pacific Biosciences, Inc. (PACB) at $5.24: targeted sequencing and genetic analysis platform.
- GlycoMimetics (GLYC) at $6.74 : novel medicines based on “glycobiology” for cancer and sickle cell disease.
- XBI- SPYDR S&P Biotech ETF at $153.34: equal weighted fund with a bias toward smaller and mid cap biotechs.
We are currently long small positions in CLDX, FCSC and PACB.
Update to follow at 10/16 close.