Are you doing the Ebola Boogie? Here’s how. Check out BioCryst Pharmaceuticals (BCRX) and Tekmira Pharmaceuticals (TKMR) (August 08, 2014)
I want to look at a couple of biotech stocks; let’s go with the Ebola virus, everybody is getting all “Ebolaized” so we might as well address this thing head-on. It’s a brutal disease, it has a fatality rate that’s very high, you all know what this is about, it’s a big news item; Tekmira ( NASDAQ:TKMR ) has been the darling of this trade, it’s up 45 percent in a day, on Friday, it’s probably going higher.
But here’s the thing, there aren’t that many people in the world that have Ebola, this is the next bird flu thing. At the risk of sounding insensitive, and generally speaking on a lot of things I am insensitive, but with that said, this is not that big a deal when it comes to market capitalization of stocks.
You watch, this stock at 20.70, this is not the only time you’re going to get a chance to buy this stock at 20.70. At some point in the future you will get a chance to buy this stock at 17.00 or 16.00 or 15.00, guaranteed. What I don’t know, and this is the important part, what I don’t know is the next time that you can buy this stock at 16.00, 15.00, 14.00, 13.00. I don’t know whether you will also have the chance to buy the stock at 30.00, 32.00, 34.00, 36.00. We just don’t know how long this feeding frenzy is going to go on.
BioCryst ( NASDAQ:BCRX ), a related company, no news at all, nothing to say about anything, up over 8 percent. Why? Because most traders aren’t particularly creative, you like to think of yourselves as being really creative and right brain and this and that, but you’re really not, sorry, you’re just not. You snap at shiny objects and so you hear Ebola and this is the deal, “Oh, I wonder what else in this sector, everybody’s doing the Ebola boogie here, so we’re buying all the Ebola stocks.
Trade the chart. What I’m saying is, Ebola “shmbola”, and I know I’m ticking somebody off because I sound like I’m not being sensitive to the plight of the this and the that. Yes I am; you’re just not listening to this video to hear me weep over that type of thing. I’m talking making money here; I’m talking about greed and capitalism, two of the basic food groups. What you want to be doing instead is just trading the chart; forget about the news, literally forget about the news because the news will make you do the wrong thing at the wrong time.
You trade this chart, you hear what Dan says about it can trade to 16.00, 15.00,14.00, $10.00 whatever. What happens if the Ebola virus goes on strike? All of the sudden it decides it doesn’t want to work anymore, it got unionized by the SEIU and it’s taking all kinds of time off; we just don’t know. But if you trade the chart you’re going to be fine.
Let’s look at what the hourly chart looks like, if this was a daily chart I would love this, this is a perfect stock to be trading. How about a 30-minute chart? This also works. What I’m saying is, when you’re looking at a stock that’s up 45 percent in a day, and it’s not because Warren Buffett decided he wanted to buy the company. This is a stock that’s in the hands of pure momentum traders, and at some point that momentum is going to be done and this stock is going to be done.
The way I’m looking at this on a 15-minute chart; who knows what’s going to happen between now and Monday morning? I can’t look at this and say this is definitely the top and you’ve got to sell on Monday; the stock could gap up to 23.00 or $24.00 on Monday, we just don’t know. You know that there are some smart guys that aren’t feeling so smart now; they are shorting this stock, because everything that I’m saying, they’re saying Dan’s is absolutely right, and then what’s that part he’s saying that it could go to 23.00, 24.00 or $30.00 first? That’s not good for me; I liked him all the way until the time he started talking about that.
The bottom line is the stock is in an uptrend, don’t second-guess it, trade it. But when the stock stops being in an uptrend you don’t have to second-guess it, jettison it, just hit the eject button and get out of here. BioCryst ( NASDAQ:BCRX ), what do you know, the bloom kind of came off the rose right here. Look at the difference in the way these things traded, the unimaginative trader.
Tekmira ( NASDAQ:TKMR ), you know you’re going to be looking at the news on this all weekend long, you’re all lathered up over it and you just think this is going to go to the moon. I’ll say it again; it’s Ebola, deadly, yes, pervasive, no. Go into any crowded room, not matter where you are, look around, I can pretty much guarantee you, it’s a lead pipe cinch, that not one person has Ebola, nor will that person ever get Ebola. So remember that this is what it is, it’s a news story, forget about the story, trade the chart. You trade the chart you’re going to be fine, you’re going to be long while it’s time to be long, and you’re going to be out or short when it’s time to be short.
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