We should be very thankful that even a horrific terror attack on a major Western city becomes yet another reason to rally the markets. Overall, Morningstar provides data on an estimated 350,000 investment offerings, including stocks, mutual funds, and similar financial investment instruments, along with real-time global market data on more than 4 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Don’t be Greedy – If your stock has made a nice run, consider selling it and taking the profits.
Generally speaking, I do not hold on to a biotech stock for more than 5-6 months, and more often than not, I hold a position for less than a month. While investors are primarily interested in the fundamentals (equity, cash flow, price-to-earnings, etc.), traders are more concerned with the short-term movement of the stock price. When there are few stocks available on the open market, the stock price can be quite volatile.
After the initial disappointment from the FDA briefing, the stock began to rebound in anticipation of the second catalyst – the PDUFA date. PDUFA stands for Prescription Drug User Free Act, and this is when the FDA either gives the company approval to market its product, or rejects it and sends the company back to the drawing board for more expensive trials.
Sure, sometimes the company will get approval and the stock price will rise, but it is not worth the risk, and FDA decisions are never predictable. Often times, even on approval, the stock price will not rise much because investors were already expecting positive results, and therefore, the price was already inflated. Halting a stock is meant to protect investors and traders on days when important news is expected to significantly affect the price of the stock.
Never, ever, ever hold you position through the catalyst date, regardless of the amount of good news you’ve read about the company, or the giant potential of its new product. Recently, the R&D Director of a small biotech company left unexpectedly, and the stock prices promptly fell, because speculators thought he might know some bad news about the company.