Biotech chart hijinks
This biotech sector is snappy!
A couple of weeks ago, I noted the volatility inherent in biotechnology makes investing in the sector based on technical analysis something of a contact sport. I figure it is probably instructive to grab a chart every once in a while for a reality check.
Examine the following chart and honestly tell yourself whether you would be long or short. The middle graph is volume and the bottom is a representation of money flow. I've hacked out the name from the chart to help keep you honest.
If you decided you would be long at the end of the day represented on the right side of the chart, congratulations. OSI Pharmaceuticals (OSIP:NASD) made you 138.86% from the close of $38.14! If you were short, it's worth noting the stock opened at $84.60 (-54%) and never traded lower than $77 (-50%). Ouch.
Since we all use different metrics for our technical analysis, I invite you to keep your honesty hat on and punch up OSIP in your favorite charting software. Roll the chart back so the right-most data point is the close on April 23rd. Run through your favorite indicators and decide whether you would have been long or short.
I know from my e-mail (keep 'em coming!) my fellow Minyans are increasingly interested in the biotech sector. If you're a chartist and you haven't played here before, I invite you to do this exercise regularly with the big 'biotech story of the day' as a gut-check on your trading decisions. As OSIP shows, sometimes these things move so fast normal loss-management strategies simply go out the window.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter