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How to Trade Dendreon Ahead of Earnings, and Other Biotechs to Watch

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Technically speaking, many smaller companies are positively correlated to Dendreon, so keep your eye on them for potential trading opportunities.

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The biotechnology company Dendreon Corporation (DNDN) reports earnings on Monday, February 27 before the market opens. In the past two months or so, Dendreon shares have approximately doubled due to what appears to be increased confidence in the Provenge commercial opportunity (see chart below).


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Provenge is an immunotherapy for prostate cancer recently approved by the FDA; but in August of 2011, Dendreon lost two thirds of its market capitalization (see chart below) when it reported disappointing Provenge sales and removed financial guidance for this product.


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In the subsequent quarters after the disappointing report, the company has changed its CEO and COO. The new CEO John Johnson, was the former CEO of Imclone, which was sold to Eli Lilly (LLY).

If the launch progress is satisfactory to investors, the stock could continue to retrace some of its losses and lift toward where it traded before Dendreon withdrew guidance, which was around the $35 mark. A large gap still remains from the August 2011 sell-off in the chart above.

From a technical perspective the stock shows good immediate term support at $13.50 but is wedged between its 50- (yellow line) and 200-day (red line) simple moving averages. Any further positive news could propel the stock further into the still-unfilled gap dating back to last August. The 200-day moving average currently sits around $19.30, which may be a good upside target should the stock be able to clear the $15 level.
Also, it may be worth taking a look at similar earlier stage companies for potential trading opportunities. Technically speaking, many of those smaller companies have been tending to follow what happens with Dendreon, i.e. are positively correlated to Dendreon (see charts below).

Here are some names I'll be watching after Dendreon reports for potential trading opportunities:

ImmunoCellular Therapeutics Ltd., (IMUC.OB)
Market cap: $70MM
Description from Yahoo Finance:
ImmunoCellular Therapeutics Ltd., a development stage company, focuses on developing and commercializing therapeutics to treat cancer using the immune system. Its product candidate portfolio includes cellular immunotherapies targeting cancer and cancer stem cell antigens; peptide based immunotherapies targeting cancer stem cells; and monoclonal antibodies to diagnose and treat various cancers.

Technical Analysis:
The stock has been trading in a wide range since early 2010 and so far this year has made a big move to the upper end of this trading channel. Currently it is consolidating nicely and as such is working off its near-term overbought levels. Next big support is around the $1.50 level. On a break above the $1.90 level the stock could accelerate and move toward $2.30 and eventually $2.60


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Agenus Inc., (AGEN)
Market cap: $65MM
Description from Yahoo Finance:
Agenus, Inc., a biotechnology company, engages in developing and commercializing technologies to treat cancers and infectious diseases. It offers oncophage vaccine for the treatment of adjuvant renal cell carcinoma.

Technical Analysis:
The stock trades both above its 200- and 50-day moving averages and is consolidating above $3. A move above $3.50 could swing the stock much higher while a close below $2 puts the stock in danger of filling at least part of the gap dating back to September 2011 (gray box).


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Celldex Therapeutics, (CLDX)
Market cap: $215MM
Description from Yahoo Finance:
Celldex Therapeutics, Inc., a biopharmaceutical company, engages in the development, manufacture and commercialization of novel therapeutics for human healthcare. The company offers Rotarix for the treatment of rotavirus infection. Its clinical development program includes CDX-110 which is in Phase IIb clinical trial for the treatment of glioblastoma multiforme.

Technical Analysis:
The stock also trades nicely above its 50- and 200-day moving averages and finds next support at its 50% and 61.8% retracement levels of its latest up-swing. The 61.8% retracement level also coincides with the 50-day moving average.


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Galena Biopharma, Inc., (GALE)
Market cap: $45MM
Description from Yahoo Finance:
Galena Biopharma, Inc., a biotechnology company, engages in discovering, developing and commercializing innovative therapies addressing unmet medical needs using targeted bio therapeutics. The company is pursuing the development of cancer therapeutics using peptide based immunotherapeutics, including its main product candidate, NeuVax (E75) for the treatment of various cancers.

Technical Analysis:
The stock is making a series of higher highs and higher lows and currently is forming a bull flag that should resolve to the upside on a trade through $1.15.


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Editor's Note: Read more at The Steady Trader.
No positions in stocks mentioned.

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