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What's Going On With Adial Pharmaceuticals?

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What's Going On With Adial Pharmaceuticals?

Shares of micro-cap Adial Pharmaceuticals Inc (NASDAQ: ADIL) have skyrocketed 196 percent in the past week on news that the company has established a Scientific Advisory Board (SAB) to explore advancement of the company’s leading drug candidate AD04 for the treatment of alcohol use disorder.

Traders are now learning more about Adial and its business to determine whether or not this week’s rally is a buying or selling opportunity.

What Does Adial Do?

Adial is a biopharmaceutical company focused on developing drugs for treatment of addictive behavior, particularly as it relates to alcohol abuse. AD04 is the company’s leading candidate and is in Phase IIb clinical trials to treat AUD, which impacts an estimated 35 million people.

Adial is part of a new wave of addiction treatment drug companies in the wake of a nationwide opioid addiction crisis, which includes companies like Alkermes Plc (NASDAQ: ALKS) and BioDelivery Sciences International, Inc. (NASDAQ: BDSI).

Why The Big Move?

After a disappointing 2018 for Adial investors, traders seem to see news of an SAB forming as a positive sign that AD04 is making progress. With the stock down about 70 percent on the year prior to this week, some buyers may see a compelling reason to get into the name at a discount, while others are likely simply trading the short-term momentum in the name.

Adial has a negligible short percent of float of only 0.5 percent, but its 3.5 million-share float makes the stock vulnerable to large swings when buying triggers heavy volume. Adial has averaged a daily trading volume of only 141,000 shares over the past three months, but the stock had already traded more than 17.1 million shares as of about 1:30 p.m. ET Friday.

At this point, Adial investors are certainly used to volatility. In fact, the stock has gained at least 12 percent in a single day eight times in 2018 alone and dropped at least 12 percent in a day seven times.

What’s Next?

Long-term investors will be watching for updates from the SAB on the plan for AD04 moving forward. Short-term traders will be watching for a potential near-term top in the stock as a potential shorting opportunity with the stock’s RSI now well into overbought territory at 76.9.

The stock traded around $4.07 per share at time of publication.

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