This Biotech Could Rocket Higher if Shorts Panic

by Sam Collins | March 1, 2013 1:49 am

Vertex Pharmaceuticals (NASDAQ:VRTX[1]) — This biopharmaceutical company concentrates on the development of drugs designed for the treatment of a wide range of diseases, led by hepatitis C and cystic fibrosis. It is expected to report losses this year, but analysts are optimistic about its cystic fibrosis drug, VX-809/Kalydeco, after the FDA granted “breakthrough therapy” status for the drug, which is currently under a 24-week study.

The shares will remain volatile despite analysts’ consensus median target of $63. The stock was listed as one of four biotechs that had an increase in short interest. For traders, high short interest presents an opportunity in that good news normally panics the short sellers into buying back their positions.

Since May 7, when the stock opened a huge gap from $38.25 to $52, VRTX declined until it found a bottom at $38. Since January, it has been building a pattern of support at its 50-day moving average at $45.33. From this support zone, the stock could launch an attack on its 200-day moving average at $52 and the bearish resistance line at $55. If the new drug receives final FDA approval, VRTX could rocket beyond analysts’ target of $63.

VRTX Chart
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