I must say we have a lukewarm rally this week. The SP500 made new historical high in the week but then settled down with a small spinning top bar.
From the weekly chart above, although the momentum indicators are turning down from overbought territory and the long-term technical divergence (see red line on the first momentum indicator below the chart) is still heading downward, price is still king so the bias is still on the upside. However, if you look at the year long technical divergence, each rally created a lower hill than the previous one; thus creating a downward trending line (red line). Since technical divergence is a lagging indicator, price still need to trend down to confirm the bearish tendency. For now, the market is still bullish and the next momentum rally may create a higher hill to negate the divergence. I’ll keep an eye on price in case it falls and penetrates the 5 MA support. Basically, despite year long technical divergence, current week continued to support the bull trend.
And then there are three…
This week is a fantastic week for my portfolio with two out of my four positions rocketing higher and they are both biotech: CARA and AMRN.
Unfortunately, I was already out of $CARA before price rocketed higher on Wednesday.
Whoa! What did you do!?!
First, $CARA was not a large position relatively to the other three positions mainly because of my reservation regarding the I.V. CR845 for postoperative pain due to the removal of the highest and most effective dose by FDA which caused price to tumble down to below $5 in early 2016. Because I’d already captured decent gain trading $CARA from $6 to $18 level which partly contributed to my 2016 overall gain, I did not want to risk too much on the possible disappointment on the two lower doses. When Himax corrected to $7.50 level last Thursday, I took the liberty to reduce $CARA position by 40% to buy more $HIMX. Then on Friday last week when $CARA dropped severely ten minutes before market close, I peeled off some more shares. By then, $CARA was only a small position relative to the other three. So when Cara Therapeutics Reported Continuation of Phase 3 Trial of I.V. CR845 in Postoperative Pain Following Interim Assessment, I was dumbfounded and thought the efficacy was not strong enough to convey a success story. After price bounced back near my entry point after opening lower, I sold the rest of my position and thus missed the ensuing rallies. Even if I kept my remaining position for the rally, the gain would not be significant.
Missing rally like $CARA is not the first time in my trading history. I’d missed quite a few that went way ahead without me; but that is the true reality all of us (investors and traders) have to deal with. I’m happy for those who remained steadfastly long on $CARA. Price could rocket even higher from here if they announced positive result next week on their Oral CR845 that is in Phase IIb clinical trial to treat moderate-to-severe acute and chronic pain.
The silver lining here is that the opportunity is not completely lost on the money I got from selling $CARA too early in hindsight, I used it to add more $HIMX (at $7.5x) and $AMRN to bet on price breaking out of $3 resistance.
$AMRN rocketed higher when the biotech industry regained momentum this week. Boom! Just like that, money flow has rotated back to biotech. And lucky for me, I added more $AMRN before price broke out of $3 resistance. There are also fundamental development that indirectly benefited the prospect of success for Amarin’s Reduce-It trial.
I believe the news, “Novartis Drug Becomes First To Prevent Heart Attacks And Strokes By Targeting Inflammation” helped fuel the possibility that Amarn’s Vascepa can be successful as well due to the fact that Vascepa have favorable effect on inflammation. Below is a page from Amarin’s June 2017 Presentation:
Because of this bonus news from Novartis, I decided to peel off shares from my extremely over-weighted position on $HIMX and increased my $AMRN position size on Friday.
My personal interpretation of available data made me favor the potential return on $AMRN over $CARA. I expect to see early stop from coming interim data review due to efficacy; if not, I expect the data review to have some positive results such that it encourages BPs to make a bid for the company. That is what I’m betting on.
Technically speaking, $AMRN is now on the verge of breaking out of the multi-years Cup & Handle pattern.
As you can see from the weekly chart above, there have been multiple attempts to break out of the handle pattern; but most of those failed attempts were made when the Stochastics momentum indicator (the bottom one) were at the overbought territory. This week rally is one solid green bar that pierced through the high of the cup ($3.33 back in March 2015) with the momentum indicator still near the lower oversold area. This could mean the bull move has only just begun. The fact that we are close to interim data review increase the possibility that the break out of the handle may happen this time around. Also, don’t forget that with Novartis’ recent success in their drug to prevent heart attacks and strokes by targeting inflammation (the drug, Ilaris, costs $200,000 a year now is very expensive compared to Amarin’s Vascepa), it is my humble opinion that there is a possibility that BPs such as PFE may feel the pressure to pursue Amarin for its Vascepa drug to compete with Novastis’ Ilaris in the event of positive data review on Vascepa. I favor PFE to be the one to make the bid ’cause of their opportunity to revitalize their Lipitor brand (statin drug) by combining it to Amarin’s Vascepa into a new combo drug to beat out generic statin. Imagine the marketing arm of PFE informing doctors across the globe promoting the effectiveness of Lipitor AND Vascepa to reduce heart attacks and strokes using the Reduce-It trial data! What is even better is that a bidding war may start on Amarin among other BPs which may even include Amazon. Someone mentioned Amazon on Stocktwits and after googling it, I found the following article, “Why Does Amazon Want To Get Into Pharmacy?” Btw, all these talks about buy out is my pure speculation only. I’ve no information other than my humble opinion (aka my 2 cents).
In summary, with such potential catalysts in the corner, I forsake $CARA in favor of swinging for the fences in $AMRN.
Obviously, my biggest swing-for-the-fences position is still $HIMX. Despite my peeling off some shares to add to $AMRN, it’s still my largest position.
From the weekly chart above, $HIMX had a rough week but it recovered nicely. Price bounced off the weekly 5 MA which is bullish. Next resistance is the 79 MA (blue dash line).
Fundamentally speaking, Himax made the following announcement this week, “Himax Technologies, Inc. Declares Cash Dividend for FY2016″. Below excerpts from the dividend announcement reminded us of the positive recent earnings call update:
“Since our IPO in 2006, we have remained committed to a dividend policy,” said Mr. Jordan Wu, President and Chief Executive Officer of Himax Technologies, Inc. “This year’s dividend represents a payout ratio of 81.4% based on our fiscal year 2016 profit. The high payout ratio demonstrates our continued support of our shareholder base and strong confidence in the outlook for 2017 and beyond. As reported in the last few earnings calls, we are enlarging our WLO capacity within the current headquarters to meet certain anchor customer’s strong demand starting 2017. We are also constructing a new building to house further WLO capacity, the next generation LCOS production lines, and additional office space. Our decision for the high dividend payout ratio, notwithstanding the high capital expenditure this year and next, reflects our confidence on the healthy balance sheet, cash flow and the strong return expected of such expansion.”
“Confidence” has been repeated twice as well as the word, “strong”. Take it what you will; but I chose to believe what CEO Wu has been trying to tell us that better time is ahead.
This week, I like to add my 2 cents regarding Himax’s state-of-the-art technologies in 3D sensing and scanning. Let me start with the excerpt below:
Our SLiM product line is a state-of-the-art total solution for 3D sensing and scanning based on structured light technology. We offer fully integrated structure light modules with vast majority of the key technologies inside also provided by ourselves. These technologies includes advanced optics utilizing our WLO technology, laser driver IC, high precision active alignment for the assembly of laser projector, high performance near-infrared CMOS image sensor and last but not least, an algorithm chip for 3D depth map generation.
Notice that the statement, “vast majority of the key technologies inside also provided by ourselves” implies that potential revenues for Himax will increase significantly if total solution is selected by customers ’cause Himax will not need to share the revenues with other 3D sensing and scanning components’ suppliers.
The next advantage I see in the excerpt above is the structured light technology. Below is another excerpt from the Q&A section of Q1 2017 earnings call that highlighted the advantages:
I will be reluctant to comment specifically our potential customers although I – we feel very confident. We are the – we enjoy a very good leadership position right now. However, I thought I can comment on this is a type of technology that in theory can provide 3D sensing. Our technology, our focus technology is something called structure light and there is a second type of technology call ToF or time of flight and then there is a third type called stereoscopic, basically using the old camera.
I think the industry is quickly catching a consensus that structured light is going to win – it’s going to be the eventual winner. From the overall perspective of performance causing power consumption and size. Now, if I compare structured light, we see – now all these technologies are not new. They are actually already applied but they are applied for industrial applications.
Our contribution – our major contribution is to transform such technology into a solution suitable for smartphone and I don’t need to tell you the smartphone is the biggest market ever. So, this is a holy grid. So, none of them actually has fundamental patents because we are already in existence for quite a while, but they are being applying in industrial applications.
Now, in comparison to TOF structured light offers much better, much higher resolution with the potential for even higher resolution, meaning we can offer a resolution roadmap similar to what you have seen over the last few years with your cameras, CMOS image sensors, starting from VGA, and 3 megapixels, 5 megapixels, now you are talking about 13 even 20 megapixels.
People are hungry for resolution and once they have something. And we believe 3D sensing will be the fence. Now with TOF, because it’s limited by its pixel size. TOF pixel size is large and physic – in terms of physics it’s very, very difficult to shrink. So, structured light offers much better resolution today and much better resolution roadmap tomorrow.
I think I that is the major advantage. Now with stereoscopic, the major problem is that, we cannot really operate properly without proper visible light, meaning when you don’t have visible light or you have very low light, then you probably need additional illumination to make it happen.
But that is actually additional cost because you are already talking about two very expensive sensors and now you have additional illumination and that makes the whole thing rather costly and also calibration and assembly are triangular to have high precision alignment of the two lenses is very tricky.
So, I think for these reasons, most people believe structured light will be the ultimate winner and that is why most people have come to us and they are already on day one basing on structured light technology.
Note: I made a few corrections on typo (changed TOS to TOF)
From what I read above, the ability to increase resolution beats the technology of ToF (time of flight). Notice the last paragraph above, “So, I think for these reasons, most people believe structured light will be the ultimate winner and that is why most people have come to us and they are already on day one basing on structured light technology.”
You’ve to ask who are those “most people” that are “already on day one basing on structured light technology.” Could they be Samsung, Huawei, Motorola? Click here to see a list of mobile phone makers by country.
From the advantages of structured light discussed above, it is conceivable that Himax is ramping up production to meet demand for the next generation smartphones with their patented superior 3D sensing and scanning technology that may ultimately replace ToF technology. Face recognition using structured light technology may be superior due to higher resolution. Basically, the technology can eliminate fake ID and/or “look alike” facial appearance due to minute detail of the facial characteristic thanks to high resolution 3D scan. Of course, this is my 2 cents based on my layman understanding of the technology.
$IBIO is still a waiting game for the company to file the IND application for their IBIO-CFB03 drug to kick off the Phase 1&2 combo trial that allows it to test on patients afflicted with the deadly fibrosis diseases. It is now the 3rd large position in my port from my long period of accumulation. Due to its low volume and liquidity, it is basically a large poker bet on my part with a huge risk/reward ratio. Win or loss, my chip is on the table.
Note: despite the huge risk I’m taking on only three positions, each one has the potential to recover more than the loss of the other twos if I hit a jackpot. Lo and behold if I hit jackpot on all three!
For more information about Dr. Carol A. Feghali-Bostwick’s discovery, click on the link below and select the first video presented by Dr. Carol A. Feghali-Bostwick.
Go to 41 minute on the video if you want to skip directly to discussion on how IBIO-CFB03 worked on human skin, the significant cost reduction of using plant-based production (this is a very important issue ’cause the significant lower cost opens the door for insurance companies to approve the treatment), and her discussion with FDA.
Thanks to $AMRN 14.68% up move this week and a slight uptick on $IBIO, my port gained nicely for the week.
Main port (no margin): HIMX AMRN IBIO (up 12.6% YTD)
Trading port (with margin): MENXF IBIO
My 2 cents
From my camera:
Categories: trading journal