Weekly thought on $AMRN, $ARTH, $BIOC, $CARA, $DMRC, $IBIO

After putting up a good fight in the 1st half of the week, the market finally gave way to the bear pressure and rolled off the cliff.

SP-500_weekly

This week down bar is disappointing ’cause it brought the price back down below the downtrend line that began from August of last year.  In a way, the resistance of this downtrend line is still in force and the bull has not succeeded in overcoming it yet. The bull needs to fight back harder next week; otherwise, the bear is going to push this down to begin the next leg of falling prices.

I sensed a possible correction coming in Tuesday and proceeded to raise cash to 80% but when price did not fall off the cliff but bounced back up instead, I began buying back some shares.  Somehow, I was never successful in timing a market fall-off.  There were many times I was corrected about the fall-off but was too early in execution which always resulted in my closing out my short-ETF positions before the actual collapse.  This week action is no difference.  Right after I closed my short-ETF ($TZA and $SKF) on Wednesday, the market proceeded to roll-off on Thursday and Friday.  After some retrospection, my failure is due to my lack of conviction on my market fall-off; otherwise, I would take the heat on my short-ETF and wait out the week.  I guess, deep in me, I expect the market to make new high soon so any thought of market fall-off is lightweight as best.

$AMRN finally has a correction week after moving up for five weeks straight.

AMRN_weekly

Although this week was a down week, it is still a weekly bar with a higher high and a higher low.  In other words, the correction is lightweight and the odd of going higher is still intact simply because the overall trend since early February is still up and price is still above the 79 MA support.  I sold all my $AMRN on Tuesday but bought back 90% of my position the rest of the week.

$ARTH has a hiccup this week but price recovered most of the fall-off by end of the week.

ARTH_weekly

Notice the long-tail in this week bar.  The long tail signifies the bullishness of the stock because existing and new buyers are watching this stock for opportunity to buy.  In other words, there are sideline money watching this stock.  This week fall-off is probably due to the release of 10-Q filed on April 28th which spooked some new investors in selling their shares due to potential dilution issue.  This issue is well known to many investors here but a successful human trial this summer have the potential to dwarf any dilution issue ’cause of the massive revenue stream in the years ahead from Arch’s AC5 disruptive hemostat technology.  Notice how price quickly climbed back up by late Friday when bargain hunters took advantage of the sell-off and bought more.

In my humble opinion, the last hurdle for Arch is the establishment of proof-of-concept that its AC5 hemostat device can work on human without negative chemical or biological reaction.  The wait of the last year is all about preparing to start the human trial.  The fact that human trial has already commenced and the result to be released this summer mean this proof-of-concept is almost here.  Yes, we are very close to knowing the “final answer”.

Personally, I’m optimistic about the human trial ’cause the ONLY hurdle I see is the neutrality of AC5 on human body.  As a hemostat device, we already know that it works ’cause it has been demonstrated to be successful to stop bleeding and prevent leaking on all preclinical tests on animals, including those on blood-thinner medicine.  Furthermore, there are already successful pre-trial toxicity tests done on human before the commencement of the human trial.  The difference b/w the toxicity test and the human trial is, from my layman understanding, the length of the time AC5 is repeatedly exposed to the human skin.

My deduction is that if I put a newly developed antibiotic cream on my skin and there are no negative reaction for 21 days, what is the odd of negative reaction if I put this same cream on my skin everyday for two or more months?  How many of us have already put cream on our skin everyday with no reaction?  While antibiotic cream is not the same as AC5, I’m simply using the logic that if it doesn’t hurt you for 21 days, why would it hurt you if you use it for 2+ months?  You can say that my deduction is naive or “uninformed”; but it is the one that help me to keep my cool waiting for the final answer this summer.

$BIOC has a horrible week with a gap-down on Friday.

BIOC_weekly

Notice that price penetrated the long-term support at $1.09; this is not good since a break of a long-term support increase the odd of further downtrend.

Once again I bailed and ate my losses.  I’ve to say that the unexpected $5 million dilution is actually not so unexpected if I’ve done my due diligence correctly.  In other words, my sloppiness costed me money this time.

“What sloppiness are you referring to, sir?”

Remember the last $15 million common stock purchase agreement with Aspire Capital Fund executed back in December 2015?  Well, I’m sure I’m not alone in thinking that Biocept has enough fund to last a bit longer for them to prove a growing business before the next round of funding.  If I’ve bothered to read the fine print of the Aspire Agreement on the Q-10 report, I will probably catch the restrictions being placed on Biocept in getting the rest of the fund from Aspire Capital.  Below is an excerpt I cut from the recent 10-K filed on March 10, 2016 under the “Liquidity and Capital Resources” section:

“On December 21, 2015, we entered into a common stock purchase agreement with Aspire Capital, which committed to purchase up to an aggregate of $15.0 million of shares of our common stock over the 30-month term of the common stock purchase agreement. Upon execution of the common stock purchase agreement, we sold to Aspire Capital 625,000 shares of common stock at $1.60 per share for proceeds of $1,000,000, and we concurrently also entered into a registration rights agreement with Aspire Capital, pursuant to which we filed a registration statement registering the sale of the shares of our common stock that have been and may be issued to Aspire Capital under the common stock purchase agreement.

Under the common stock purchase agreement, on any trading day selected by us, we have the right, in our sole discretion, to present a purchase notice directing Aspire Capital to purchase up to 100,000 shares of our common stock per business day, up to $15.0 million of our common stock in the aggregate at a per share price equal to the lesser of either

  • i) the lowest sale price of our common stock on the purchase date, or
  • ii) the arithmetic average of the three lowest closing sale prices for our common stock during the 10 consecutive trading days ending on the trading day immediately preceding the purchase date.
  • In addition, on any date on which we submit a purchase notice to Aspire Capital in an amount equal to 100,000 shares and our stock price is not less than $0.50 per share, we also have the right, in our sole discretion, to present Aspire Capital with a volume-weighted average price purchase notice directing Aspire Capital to purchase an amount of stock equal to up to 30% of the aggregate shares of our common stock traded on our principal market on the next trading day, subject to a maximum number of shares we may determine. The purchase price per share pursuant to such volume-weighted average price purchase notice is generally 97% of the volume-weighted average price for our common stock traded on our principal market on the volume-weighted average purchase date.

The purchase price will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, or other similar transaction occurring during the period(s) used to compute the purchase price. We may deliver multiple purchase notices and volume-weighted average price purchase notices to Aspire Capital from time to time during the term of the common stock purchase agreement, so long as the most recent purchase has been completed. The common stock purchase agreement provides that we and Aspire Capital shall not effect any sales on any purchase date where the closing sale price of our common stock is less than $0.50. There are no trading volume requirements or restrictions under the common stock purchase agreement, and we will control the timing and amount of sales of our common stock to Aspire Capital. Aspire Capital has no right to require any sales by us, but is obligated to make purchases from us as directed by us in accordance with the common stock purchase agreement. There are no limitations on use of proceeds, financial or business covenants, restrictions on future fundings, rights of first refusal, participation rights, penalties or liquidated damages in the common stock purchase agreement. In consideration for entering into, and concurrently with the execution of, the common stock purchase agreement, we issued to Aspire Capital 165,000 shares of our common stock. The common stock purchase agreement may be terminated by us at any time, at our discretion, without any cost to us. Aspire Capital has agreed that neither it nor any of its agents, representatives and affiliates shall engage in any direct or indirect short-selling or hedging of our common stock during any time prior to the termination of the common stock purchase agreement. Any proceeds we receive under the common stock purchase agreement are expected to be used for working capital and general corporate purposes. Approximately $14.0 million, or up to 2,984,122 shares, remains available to be issued to Aspire Capital under this agreement as of March 3, 2016.”

Source: http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=11250544-349399-379802&type=sect&TabIndex=2&dcn=0001564590-16-014436&nav=1&src=Yahoo

In the above excerpt, the underlined (highlighted in blue ink) is my own emphasis.  If I read it correctly, that means Biocept can only withdraw fund at 100,000 shares per business day.  Now, if price has rallied to $3 or $4 a share, the number of times to sell the 100,000 block shares to raise fund from Aspire would be a lot less than at $1.50 or lower. The sheer number of times to sell 100K block of shares every business day at price below $1.50 for $5 million dollars is probably not worth the effort and expense compared to the recent additional $5 million dilution.

Now, with my understanding of the above, I should not be surprised of Friday additional dilution to raise $5 million dollars.  What bother me even more is that this recent $5 million is not going to be enough giving their current rate of their liquid biopsy sales.  The fact that they are announcing this deal now before the earning update next week spells trouble to me; thus I sold $BIOC and ate my losses on Friday.

Looking back, my not selling $BIOC last Tuesday was a mistake in hindsight; at the time I thought another positive earning grow in next week earning may spark another rally.  Unfortunately, the dilution issue is much bigger than I thought due to my not understanding the Aspire Capital funding correctly.

Oh well, moving on.

$CARA corrected again this week.

CARA_weekly

I also sold $CARA last Tuesday but bought back on Wednesday.  Then I got spooked on Thursday when price dropped below Wednesday low which prompted me to sell my Wednesday re-entry position for losses.  I did not chase the stock back when it rallied to finish strong on Thursday.

My being so easy to be spooked has to do with my desire to protect my gain I made and the fact that the excitement of Cara’s IV CR845 has softened due to the uncertainty of the remaining two low doses to continue on the Phase 3 trial.  Perhaps, the two low doses are still valid to pass the Phase 3 with efficacy but the “certainty” of the success in the high doses that was removed is now gone.  So we are dealing with volatility while waiting for the Phase 3 trial to be over.  I’m going to wait until the price settle down before jumping back in since I still believe in Cara’s non-addictive painkiller formula.

$DMRC is up for the week.

DMRC_weekly

Unfortunately, I sold my position on last Tuesday and did not reenter afterward.  I was waiting for the earning update before deciding my next move.  Based on earning conference call, the GS1 collaboration will become official in June.  This is very good news but I’m more worried about the month of May that carry the “potential” of the market correction from the popular saying “sell in May and go away” theory.  Thus, I decided to hold off from buying back Digimarc until June.  Of course, I risk missing the boat if there are announcement of big retailers jumping on board.

I got back into $IBIO this week strictly due to the breakout that took place on Wednesday.

IBIO_weekly

My willing to chase the breakout on Wednesday morning is due to the latest update from iBio annual shareholder update on April 7th.  I was happy to hear that iBio had a Pre-IND meeting with the FDA back in December 2015.  See excerpt from the shareholder update below (underlined and blue ink is my own emphasis):

“Mr. Erwin also described the rationale for the Company’s selection of systemic sclerosis as its first clinical indication in the fibrotic disease area, including that early stage clinical trials for systemic sclerosis will target endpoints that can be objectively measured more rapidly than is possible with idiopathic pulmonary fibrosis (IPF), making the path to demonstration of efficacy shorter. He disclosed and summarized the Company’s pre-IND meeting with the FDA in December, 2015 in which preclinical toxicology, manufacturing, and clinical trial design plans were reviewed and discussed, and he commented on plans beyond the first clinical trial.”

Source: iBio, Inc. Holds Annual Meeting in College Station, Texas

Although I paid more to get back in from before, I did successfully grow the money thru reallocation to $GWPH, $CARA, and $AMRN.  Thus, paying a bit more now is a small price to pay.

I like the recent iBio joint venture with affiliates of Eastern Capital Limited (the “Eastern Affiliates”) to develop and manufacture plant-made pharmaceuticals which included iBio CMO LLC entered into a 35 year operating lease with the Eastern Affiliates, to control a 139,000 square foot Class A life sciences building located on approximately 21 acres in Bryan, Texas. The facility, previously owned by Caliber Biotherapeutics LLC and its affiliates, and now owned by the Eastern Affiliates, is located on a technology corridor abutting the campus of Texas A & M University, home of the National Center for Therapeutics Manufacturing, a leading center for research in the production of vaccines and protein therapeutics.  This joint venture added more weight to iBio’s commitment in plant-based biotechnology for developing and manufacturing biological products as well as having a strong financial backer to support this venture.

While this week is not a good week for my port; however it is a great month nevertheless.  In a way, I made three giant steps (wins on $GWPH, $CARA, $AMRN) but gave back only a small step ($BIOC losses).  While I’m no longer a stone-throw away from recapturing my 2015 losses, it is still within sight nevertheless.

Current holdings:

Main port (no margin) : AMRN, IBIO and 44% cash (up 21% YTD).

Trading port (with margin): ARTH (up 45%)

FYI, in lieu of using margin, I prefer to use cash account on high-beta stocks to capture gain.  I actually believe that catching a high-beta small cap stock as its beginning stage is less risky than leveraged up on big cap stocks.  Of course, it all comes down to selecting the right small cap stocks to bet on.

My 2 cents

From my camera:

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Categories: Daily trading Journal, trading journal

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