1 Stock to Buy, 1 Stock to Short: Small-Cap Pharma

These chart patterns portend some dramatic moves ahead

   

All day I scan the charts looking for technical patterns to trade, both to the long and short sides. My Trending123 Pattern Scan powered by Recognia is one useful tool I have to scan the markets quickly, and it is showing two technical events in these small-cap pharmaceutical stocks.

Buy the Symmetrical Continuation Triangle

5 16 13 pphm 300x192 1 Stock to Buy, 1 Stock to Short: Small Cap Pharma
Click to Enlarge
Peregrine Pharmaceuticals
(PPHM) is showing a symmetrical continuation triangle that has developed over the past 44 days.

The price has broken upward out of the consolidation period which began in mid-March, suggesting a continuation of the prior uptrend.

A symmetrical continuation triangle shows two converging trendlines as prices reach lower highs and higher lows. Volume diminishes as the price swings back and forth between an increasingly narrow range reflecting uncertainty in the market direction. Then well before the triangle reaches its apex, the price breaks out above the upper trendline with a noticeable increase in volume, confirming the pattern as a continuation of the prior uptrend.

Recommendation: Buy PPHM for a $1.89 – $1.97 target.

Short the Bearish Pennant

5 16 13 agen 300x190 1 Stock to Buy, 1 Stock to Short: Small Cap Pharma
Click to Enlarge
Agenus
(AGEN) has developed a bearish pennant over the past six days—making this a pattern likely to play out in the short term.

The price seems to be resuming a sharp decline after taking a brief pause a few days ago. A bearish pennant pattern usually occurs during a dynamic market decline, representing a brief period of indecision before running off again in the same direction. Though the market overall isn’t declining, when looking at AGEN’s chart you can clearly see the pattern of two converging trend lines with diminishing volume. The pattern will be confirmed when the price breaks down through the lower boundary to resume the decline.

Recommendation: Short AGEN for a $2.80 – $3.10 target.

InvestorPlace advisor John Lansing tracks the charts all day and offers expert technical analysis in his day trading, options and trading services: Power Trading at the OpenParabolic Options and Trending123.  Trending123 members receive access to the Trending123 Pattern Scan powered by Recognia free as part of their membership. For more information on which service is for you click here.


Article printed from InvestorPlace Media, http://investorplace.com/247trader/1-stock-to-buy-1-stock-to-short-small-cap-pharma/.

©2014 InvestorPlace Media, LLC

Comments are currently unavailable. Please check back soon.