Finally, it took the market about 2-1/2 months to recover lost ground from the collapse off the 2016 starting gate. This week, the SP-500 closed at $2049.58, $5.64 slightly higher than the 12/31/2015 close of $2043.94. Not bad! Not bad at all. Imagine all the doom-and-gloom short-sellers licking their wounds once-again.
From the above chart, it took the first six weeks for the market to find the bottom and the next five consecutive weeks to recover lost ground. In short, the bull’s resolve to regain lost territory is quite strong and impressive. We may see some skirmishes b/w the bull and the bear from here but I believe the bull is going to make at least one new high before the November Presidential election.
$DMRC bounced off from last week spinning top bar next to support as expected.
By looking at the weekly chart above, you could see that there are strong support in the mid-$26ish area. For the past four weeks, short-sellers could not walk the price past the support. Buyers were there to buy it back up. I was also one of the buyers at the $26.50 to build back up my position.
With each month passed, we could expect more progress developing behind the curtain between Digimarc and the retailers. This is now a waiting game for some surprise annoucement on progress. With GS1-US, the godfather of barcodes, behind Digimarc, the probability of success is high in my humble opinion.
Before I get into my biotech positions, I like to present the chart of $IBB (iShares Nasdaq Biotechnology Index Fund ETF).
While the collapse of the biotech sector did not bounce back to 12/31/2015 level, it is now testing the double-bottom formation here from the look of the daily chart above. Thus, I’m seeing a coming bounce soon for the biotech sector. From this perspective, I’m loading up on Biotech stocks to take advantage of the current low price for the big bounce yet to come.
My first big win in 2016 is $GWPH. Monday morning, GW Pharmaceuticals surprised all investors and short-sellers alike with the announcement of Positive Phase 3 Pivotal Study Results for Epidiolex® (cannabidiol). In other words, my bet hit the jackpot. This was an easy bet since I’m aware that current patients with epilepsy are using cannabis oil such as Charlotte’s Web to reduce the frequency of attack. Although cannabis oil such as Charlotte’s Web is not the same as GW’s Epidiolex, the process of “deduction” using existing results from cannabis oil made it an easy bet. While the essence of the bet is easy, the volatility created by the short-sellers screaming at the top of the lungs that the trials would fail made it difficult to stay invest in full-size position. In fact, I almost missed out half-the-gain by reducing my position on Thursday (before the Monday announcement) due to price breaking long-term support. Luckily, price rebound on Friday and I jumped right back in with my full-size position before the surprised Monday announcement.
While I had traded a part of my position after the spike-up to prevent from giving back too much gain, I’m back in full-size position by yesterday. With a successful trial, I just don’t see how the FDA will deny approval since there is no known FDA approved treatment for the Dravet syndrome, a rare and severe form of epilepsy in children.
Instead of highlighting my own reason for being bullish on $GWPH, I like to present an excerpt from an article who did a much better job than me and I think it is a worthy read for all interested parties.
“What investors should really focus on is the company’s strong balance sheet.
With $324.1 million in cash on hand as of Dec. 31 and low debt, with a debt-to-equity ratio of 0.38, GW Pharmaceuticals has the financial staying power that most players in the booming marijuana industry lack. Many of these start-ups face eventual bankruptcy or acquisition.
The company also has forged a proprietary drug technology platform for developing cannabinoid drugs that would be difficult for competitors to replicate. The company holds at least 46 patents for this tech platform, complemented by its own in-house manufacturing facility.
GW Pharmaceuticals is working on an array of treatments for rare and hard-to-treat diseases, and the treatment for epilepsy that received positive news this week is among the most promising. Other treatments in the pipeline are targeted to multiple sclerosis and various seizure-related maladies.
With the stock trading at about $84, the median one-year analyst price target is $148, which would represent a gain of 74.7%. On the high end, the price target is $172, for a gain of 103%.”
$CARA is my new biotech position in which I’d kept an eye for a long-time waiting for the right time to get in.
From the daily chart above, the doji bar (highlighted in yellow circle) was all I needed to see to start a position the next day. Notice that this doji bar is above the support of $4.26.
The fundamental reason why I like Cara Therapeutics is their pipelines that included a painkiller without the side-effect of opiate. In other words, if the Cara’s drug works, it “can” become a huge market all by itself simply because of the danger in current painkillers that are derived from the opium poppy plant. The risk of addiction is quite high with the current form of opioid pills such as oxycontin. (Please read this article for more information: Unintended consequences: Why painkiller addicts turn to heroin)
Of course, Cara’s new drug has not been proven yet; in fact, there is a recent clinical hold in their Phase 3 trial and I’ll let other writer described it better below:
“On Thursday, Cara Therapeutics announced that its postoperative pain treatment drug CR845– currently in Phase 3 trial – had been placed on hold by the FDA, saying the regulatory agency needed more time to conduct a safety review. In a statement Thursday, Cara said the trial was postponed after some patients exceeded a certain level of serum sodium levels, which triggered a stopping rule.
The safety review’s initial results indicate no serious adverse events have been reported in connection with the trial, the company added. “We look forward to continuing the study, pending FDA review, as we work to bring this novel class of therapeutics to patients in need of additional pain treatment options,” CEO Derek Chalmers said in a statement.
Cara Therapeutics focuses on the development of chemical entities that cure pain and pruritus. Cara Therapeutics also said that a safety review was begun by both the company and its Independent Data Monitoring Committee in accordance with the protocol. “We are working closely with the FDA to review patient safety data and resolve this issue in a timely manner,” Chalmers added.”
By buying $CARA now, I’m betting that Cara Therapeutics will successfully resolve the issue with FDA and continue on with the trial in the 2nd quarter. Hence, this clinical hold set back is a blessing in disguise as far as I’m concerned and offered me an opportunity to buy shares under $5.00.
Sidebar: Another reason why I want to load up on $CARA is because they have a large cash balance that represents about 80% of its current market cap. To me, the price has not reflected the market potential of its painkiller without the opiate side-effect. I know, I know, potential is not money yet but based on their positive results on the Phase 2 trials, I’m more inclined to believe they will succeed.
However, in order to load up on $CARA, I need more cash to do so. Thus, I reduced position size on two of my least performance stocks in my portfolio, $BIOC & $IBIO, to buy more $CARA.
$BIOC did not have a good week due to the biotech sector taking a hit.
Seeing another possible downtrend due to last week bar with a long-tail above the green bar, I decided to unload shares to move capital to $CARA as described above. However, I’ll definitely come back to rebuild position on $BIOC (hopefully with profit from $CARA) when their fundamental improves due to gaining ground in selling their tests to the medical community.
$IBIO disappointed due to sell-off on Friday. I’ve no choice but to unload shares myself before others got ahead of me. I used the cash to buy more $CARA.
There seems to be a pattern of up-and-down weeks on the iBio weekly chart. While the range of the up & down bars are narrowing to give the appearance of an ascending triangle which could mean a possible breakout to the upside, the weakness on Friday tells me that there are not enough big buyers below picking up shares to stop the waterfall action on Friday anticipating a breakout. Although I took losses with this $IBIO speculation, I’m confident that I can make it back with $CARA.
I’m still hopeful with the prospect of fibrosis treatment that iBIO is working on but the opportunity I see in $CARA motivated me to move on. I’ll wait for iBIO’s announcement of their start in fibrosis trial before jumping back in (again, hopefully with profit from $CARA).
$ARTH had a good week since it continued to head higher after last week big jump.
From the weekly chart above, I’m seeing a bottom being form here. The next resistance is at the $0.25 level which also are the resistance of the 89 xma line. I’ve high hope that the human trial will come out with flying color and the stock will make new high by summer time. But that is my personal perspective and thus my speculation in this one. I’ve already hold this one for over 12 months so I’m qualified for long-term capital gain if a big win is to come. Yay!
As you can see, I’ve made some modification to my buy-and-hold strategy when I see new opportunity presented itself. Instead of remaining over-weighted on $DMRC, I unloaded some so I’d capital to speculate in $GWPH. Now with $CARA as another opportunity not to be missed, I unloaded $BIOC and $IBIO (both non-performing for quite awhile) in order to raise cash to take up a large position. In a way, I’m remaining flexible despite my original buy & hold objective. If $CARA outperforms due to gaining back positive result on their “adjusted” Phase 3 trial to be approved by FDA, I’ll continue to hold for long-term but unload some to take profit and re-invest back to $BIOC and $IBIO.
Like the SP-500, my port is now back to positive territory from 12/31/2015 close thanks to the big win on $GWPH. Now, I need to recover my losses from 2015 and then make new high in my port balance for 2016.
My 2 cents.
From my camera: