Weekly Thought on $CARA, $CERS, $DMRC, $IBIO, $KGJI, $LRAD, $SEED

Holy mackerel!  There are more than a handful of stocks I put into my portfolio this week. Seven! What’s going on? Am I inched toward diversifying now?

Before I get into that, I want to talk about the light bulb that lighted up in my head this week. I found the missing piece that might help me determine whether I should hold or take profit.

No more confusion about whether it is a momo play for quick profit or a long-term hold that is going to last more than several days.  The key that will turn on the automatic switch b/w quick profit or long-term hold is the size of my position.  The larger the size, quick profit should be the dominant goal. The smaller the size, swing-trade to long-term hold is the play. So, if I’m swinging for the fences, I should be mindful to take generous profit even if it shows up on the first trading day of the position.  And for smaller size, I’ll have the fortitude of taking the heat from drawdown.

A perfect example this week is how I traded $CARA.  Having seen the big drop in the previous week, I decided to venture back into $CARA mid-week with only a quarter of my original position size. With a relatively smaller size, suddenly I’m no longer concern about the Friday drop ’cause my objective is to bet on the result of the pruritus trial result that will be released any time between now and end of March.

Win or loss will depend on the trial result; therefore, I do not care about the Friday drop that has everything to do with the momo traders and short-sellers and nothing to do with the trial result.  Who give a hoot if the short-sellers pushed price down a couple of bucks from current high if a successful trial can double the price instantly.  With a smaller position, potential loss is much more manageable if the trial does not work out.

Why am I confidence the trial will be a success?

I use the simple logic that all human responds the same to pain and pleasure. Basically, if I poke 100 people with a sharp pencil with no warning, all 100 will yell “Ouch!” and probably going to beat me up for poking at them.  Regarding to pleasure, why do you think we are so preoccupied with sex all the times?  Therefore, if there is a new drug that will reduce post-operation pain in the previous Phase I and II trials, what is the odd of it keep doing the same even if you increase the population size of the patients to be tested in the Phase III trial?

Too simple and basic to be relied on?

While the universal human responses concept is simple the science of reducing the pain using a new method (by targeting the body’s peripheral nervous system) to avoid the negative effect of opiate addiction is not.  But once it is discovered and found to work on human during the Phase I and II trials, IMHO the odd of success is pretty good for the final Phase III trial.

While there may be some side affects of CR845 that the trial result will reveal, I bet the symptom is pale compared to opiate addiction that may lead to death by overdose. Aspirin has side affects too but millions use it because it works up to certain level of pain. CR845 may be the next generation of pain killer that will replace the addictive opiate pain killer to handle the pain that Aspirin or similar over-the-counter painkillers (such as Advil and Tylenol) cannot.

So, based on my own logical deduction explained above, I’m confident that CR845 will be successful in the coming human trials.  Of course, I’m using the same logic above to apply to the current pruritus Phase 2 trial that is coming out any day now.

Next, I jumped back into a stock I used to own for many years and profited quite a bit even though I had to give back a chunk of gain in 2015 when the company botched its sales to the Middle East city for its mass notification system. The stock is $LRAD (as in Long Range Acoustic Device).

I thought I’m done with this stock until I learned that they had changed the CEO.  Then when I checked the chart, I saw a long-term support at $1.40.

lrad_weekly

When price bounced off the $1.40 low, I decided to venture back in.  There is also another reason why I’m interested in this stock again. With the possibility of the southern wall being built between U.S. and Mexico border, I’ve a good feeling that LRAD may be able to get a piece of the business by supplying long-range acoustic devices (LRAD) to all the monitoring towers along the border wall.  These LRAD can reach out to human ears that are miles away. Thus, any approaching people can be reached by LRAD with a warning message or an ear piercing sound that will drive them away.

LRAD’s latest technology improvement on their mass notification system is also another possibility for the company to expand its revenues stream. Currently, LRAD’s mass notification system is popular in Japan for the tsunami warning.  With the new CEO in charge and having read the earning transcript that came out this week, I believe the company has the right leadership to turn this company around.  The botched mass notification sales to a large Middle East city in 2015, I believe, is now a thing of the past.  The new CEO has shown to be proactive in seeking businesses and has no issue spending money to improve sales which the previous CEO should have done. Recent earnings reflected a record breaking bookings number which proves that the new CEO’s action is paying off.  In summary, I believe 2017 is the year for LRAD’s technology to become relevant in our new world order.

Here is a link to the earning transcript-> LRAD’s (LRAD) CEO Richard Danforth On Q1 2017 Results – Earnings Call Transcript

Another stock I jumped back in is $CERS. Cerus is now trading at the long-term support at $4 dollar.

cers_weekly

After one look at the chart, I know I’ve to get back in.  Actually, I was quite delighted to see price traded down back to $4 ’cause I prefer to buy when I see a potential bottom of a stock that I believe has potential.  This was the same reason why I bought $CARA when it traded down to $5-$6 areas last year.

Below is an excerpt from the previous Q3 earning transcripts that highlighted my excitement:

Full nationwide availability of INTERCEPT platelets is now on the horizon with large blood services beginning to produce INTERCEPT across multiple manufacturing sites and with the first five BLAs submitted. These developments indicate that there will be an increase in supply of INTERCEPT platelets available across the US in 2017 and 2018.

The above statement regarding increasing supply is important ’cause Cerus has to be able to supply hospitals when they made the decision to go with Cerus’ blood system.  Below excerpts from Q&A highlighted the hospitals’ concern.

Obi Greenman

Yes. Thanks, Josh. It’s a great question. Really the struggle right now with adoption in the US is the supply demand equation. So you have hospitals that you want to go and then they typically want go 100% once they have made a decision because they’re concerned about the ethics of being of partial adoption.

And so then you get into a situation where the large hospital customers or blood centers need to be fulfilled at a 100% and then that automatically sort of constrains the initials – the initial ability of those blood centers to supply all the demand.

And so I think what we’ll see them would be –I sort of alluded to in the prepared remarks that with the BLAs coming through next year that will expand the export market and allow for some ability to fulfill that unfulfilled demand.

Therefore, with the ongoing development happening, I’m thrilled to have the opportunity to jump back in at $4 support. Once supply is available and hospitals begin to sign up for Cerus’ blood systems.  This stock will rally onward.

But Cerus’ main dish is in the INTERCEPT Blood System for red blood cells that inactivates blood-borne pathogens in red blood cells donated for transfusion. This market size eclipses the current market for the approved INTERCEPT platelet & plasma blood system. The INTERCEPT system for red blood cells is currently in trial for the European market and is targeting a submission date for CE mark before year-end and a commercial launch in 2018.  So, I’m expecting to see price begins a slow climb from $4 and exceeds last year high this year.

I also jumped back in $KGJI looking for the bounce off the weekly 79 & 89 MA support.

kgji_weekly

Kingold corrected when gold price declined late last year; however, the company did not participate in the gold rally since January of this year.  Therefore, I see a huge disconnect that may be remedied by market equalization force soon.

I was in and out of $DMRC this week but decided to buy back a position before the week was over.

dmrc_weekly

With a strong general market making historical high this week, I figured it is safe to buy back in looking for a bounce off the long-term trendline support. The coming earnings conference call on Feb 22nd will be the catalyst for the bounce if there are talk of increased bookings for the Digimarc barcode sales.

I am glad to jump back into $SEED last week.

seed_weekly

Price bounced nicely off the 79 & 89 MA support as I’d predicted. Furthermore, there is a Fib 50% retracement support that aligned with the 79 & 89 MA support. This combo makes the $2 level a powerful support level.

My take is that once $SEED receive the $60 million when their sales of their production and distribution operation is finalized, this one will go much higher.

Finally, my old favorite $IBIO is continuing to hold strong at the 40 cents support level.

ibio_weekly

See how the weekly 5 MA begin to level up with the momentum indicators below turning up?  All it takes is one little spark (of news regarding contract or fibrosis) and this one will take off back to the dollar level.  Watch the video again.

Seeing the potential bounces from the old stocks I’m going back in, you now understand why I’m back to seven stocks instead of less than five.  As you know, by having more stocks in the portfolio, I can’t be swinging for the fences for all of them.  So, the new comers are now in the mid-range size that afford me some space to weather the reasonable drawdown when needed to.

Thanks to gain in $SEED, my port was able to remain neutral for the week despite a drawdown from $CARA due to Friday drop.

Current positions:

Main port (no margin): IBIO   SEED  LRAD  DMRC  CERS  CARA  KGJI and  20% cash. (up 8% YTD)

Notice that CARA is now second to KGJI as being the smallest size

Trading port (with margin): MENXF  IBIO  &  GRWG

My 2 cents

From my camera:

yellow-flower



Categories: Daily trading Journal, trading journal

Tags: , , , , , , ,

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