Short
Clovis Oncology Inc (CLVS)
Tuesday, November 19, 2013
Company Symbol Industry Rating YTD % Gain
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The Stock Rating indicates the combined score of our proprietary Earning Strength and Company Performance models. The rating scale is 0 - 10 with 10 being the highest. Clovis Oncology Inc - Last 30 Days
Clovis Oncology Inc - Last 3 Months
Clovis Oncology Inc - Last 6 Months
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The Trade:
After a hot start to the year, Biotechnology stocks took a major hit in early October and have struggled ever since XBI. CLVS was the subject of some serious M&A activity back in late-September, but after that fell through, the stock sold off sharply on a September 25th gap down. Unfortunately for CLVS, Biotech stocks got hammered the very next week, sending the stock down even further.
CLVS appeared to be basing just above $48 after holding there in mid-October, and again in early-November. However, after a sharp selloff yesterday afternoon, CLVS fell below recent support and now faces a dire technical set-up.
Looking back to June 3rd, you'll see that CLVS gapped significantly higher up to $50 from $37. While the stock entered the gap in October, the double-bottom base above $48-50 over the last month was enough to hold off the short-sellers piling on. Now that CLVS has broken down again, it is firmly entrenched in an intermediate-term downtrend and could fill the gap down to $37 moving forward. Analysts aren't exuberant about CLVS either following a lackluster October 31st Q3 earnings announcement and a subsequent initiation of "Neutral" at H.C. Wainwright.
While $37.10 would be the next logical move for CLVS, I am setting our price target at $44.75 for a couple of reasons. First, shorting stocks in a bull market is difficult, and finding stocks that can sustain significant periods of selling while the market rallies is rare. While the technical analysis behind this trade may be "right" and the stock is likely to experience further downside action, expecting a +22.05% gain in order to reach your subjective goal is ridiculous. So, I'm suggesting we don't get greedy and cover at $44.75, which would produce a quick gain of +6%, likely this week.
CLVS is breaking down and has entered a weekly gap to the downside. While I wouldn't get too greedy and play an entire fill of the 22% gap, CLVS should be good for a quick +6% gain on a short trade to $44.75. Given its dire technical picture, a lack of bullish chatter due to weak intermediate-term price action and soft Q3 earnings, and weakness in Biotech, CLVS looks like a great short opportunity at current prices.
When to Enter the Trade:
Short at current prices (~$47.60) or below.
When to Exit the Trade:
At a close above $48.34 (Cover) / A close below $44.75 (Profit-Taking)
Company Profile:
Clovis Oncology, Inc. is a United States-based biopharmaceutical company. The Company develops anti-cancer agents. It focuses on acquiring, developing and commercializing anti-cancer agents in the United States, Europe and additional international markets. Its product candidates includes CO-101, a lipid-conjugated form of the anti-cancer drug gemcitabine,; CO-1686, an orally available small molecule epidermal growth factor receptor and CO-338, an orally available, small molecule poly (ADP-ribose) polymerase, or PARP.
Disclosure:
At the time of publication the editor and affiliated companies own the following positions:
None
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