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This New Strategy Makes Sense of Biotechs’ Erratic Moves

This New Strategy Makes Sense of Biotechs’ Erratic Moves

You may have seen the Morning Movers section that follows these Winning Investor Daily articles.

It covers 10 stocks with the greatest gains by noon Eastern time each day.

I’m the person that puts this list together every day the market is open.

I also do a version of this list just for our team at the end of the day that includes the stocks with the greatest losses.

The point of these lists is so that we can stay on top on the biggest moves in the market.

Identifying these moves is easy. But understanding the driving forces behind them isn’t.

It’s not always clear why stocks move the way they do in the moment.

That’s why I find one type of stock equal parts frustrating and fascinating — biotechs.

Moves in Biotech Are Hard to Explain

Let me start by giving you a behind-the-scenes look of how I create these lists.

Once I identify a big move, I start to look for the reason why the stock is up or down.

Sometimes the reason shows up in one of the big news headlines of the day. That makes my job easy.

But other times I have to go digging for information.

Take an electric vehicle (EV) stock, for example.

Sometimes it moves because the company unveiled a new EV.

But it can also be because some new EV legislation rocked the entire sector.

Sometimes it can be a positive or negative reaction to a move in the stock of a rival.

And sometimes it can be because of a rise or drop in the price of a key metal necessary for EV batteries.

This is why biotechs are frustrating.

With most other stocks, with enough digging I’m able to find out why they moved.

But with biotechs, I can start my search with mainstream sources like The Wall Street Journal and go down the rabbit hole to pharma blogs and even Twitter and still have no idea why the stock moved.

We Don’t Need to Know the “Why” to Profit From These Trends

Now, here’s why biotech stocks are fascinating.

Sometimes I’ll see a biotech making strange moves over the course of days or weeks with no explanation.

And finally, it will end with a huge up or down move accompanied with some big news.

Here are some examples from just the last week:

  • Cutera Inc. (Nasdaq: CUTR) made its way onto the Morning Movers after a 12% jump when the FDA approved its first-of-a-kind, energy-based acne treatment device.
  • Staar Surgical Co. (Nasdaq: STAA) climbed 9% and featured on Morning Movers after the FDA approved its implantable lens for correcting myopia.
  • Oric Pharmaceuticals Inc. (Nasdaq: ORIC)’s 13% rebound showed up in the Morning Movers following a 28% drop after trial data showed that its lead candidate for prostate cancer wasn’t viable.

The strange moves in these stocks before big news can be one of two things.

Either it’s absolutely random, with investors trading erratically on emotion and other whims.

Or some insiders in the market were trading on information that the rest of us didn’t have.

Now, we’ll probably never know exactly what the insiders know.

But we may be able to pick up on their moves and make a prediction on the stock.

In order to do this, we have to be able to separate out the random moves from the moves caused by the insiders.

Fortunately, Ian King and Steve Fernandez have been working on a new strategy that can tell you exactly when those early moves mean good news for stocks.

You can find out all about it on Thursday by signing up for our webinar.

Regards,

text

Andrew Prince

Research Analyst, Strategic Fortunes

Morning Movers


 

From open till noon Eastern time.

Adagio Therapeutics Inc. (Nasdaq: ADGI) discovers and develops antibody-based solutions for infectious diseases. The stock soared 52% after the release of better-than-expected trial results for its COVID-19 treatment candidate, prompting the company to pursue FDA approval in the next quarter.

 

Forge Global Holdings Inc. (NYSE: FRGE) provides a marketplace and infrastructure for private company shareholders to trade private company shares with accredited investors. The stock is up 19%, continuing on volatile swings back and forth since the company went public via a SPAC deal last week.

 

Vir Biotechnology Inc. (Nasdaq: VIR) develops therapeutic products to treat and prevent serious infectious diseases. It is up 19% this morning on the news that it is set to join the S&P SmallCap 600 Index starting next week.

 

Arhaus Inc. (Nasdaq: ARHS) is a lifestyle brand and omni-channel retailer of premium artisan-crafted home furniture. It is up 17% after its record-breaking fourth quarter and 2021 results far exceeded Wall Street’s expectations.

 

Ambac Financial Group Inc. (NYSE: AMBC) provides financial guarantee products such as bond insurance to clients in both the public and private sectors globally. The stock is up 17% after the company announced a stock repurchase program up to $20 million.

 

TMC The Metals Co. Inc. (Nasdaq: TMC) is a development-stage company that explores the seafloor for a new source of battery-grade metals such as nickel, cobalt, copper and manganese. The stock is up 16%, recovering from a recent sell-off when impatient investors were unimpressed with the progress the company was making given the recent run-up in metals prices.

 

Nordic American Tankers Ltd. (NYSE: NAT) acquires and charters a fleet of crude oil tankers internationally. It is up 14% on the news that one of its board members was buying up more shares in the company.

 

Lithium Americas Corp. (NYSE: LAC) explores for lithium deposits in the US and Argentina. It is one of the battery materials stocks that is up 13% today on the news that President Joe Biden plans to invoke Cold War powers to encourage domestic production of critical minerals for EVs and other types of batteries.

 

Grifols S.A. (Nasdaq: GRFS) manufactures, prepares and sells hemoderivative therapeutic products. The stock is up 13% on speculation that there are several private equity firms interested in buying out the company.

 

Nuvalent Inc. (Nasdaq: NUVL) is a clinical-stage biopharmaceutical company focused on creating precisely targeted therapies for cancer. The stock rose 12% after the company provided an update for the fourth quarter showing that it was on track to get two compounds in clinical trials by the middle of the year.

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