Short-term Swine Flu trades

Many apologies for shirking my blog duties lately. I’ve been immersed in several business projects which are taking 110% of my time, but that doesn’t mean that I’m dropping my beloved blog altogether; rather, my posts will be limited in scope for the next month or so—at least until after the LA Trader’s Expo where I’m scheduled to give a workshop on June 4th. More on that as the date approaches.

Today I wanted to provide a list of quick trades that the more risk tolerant may want to consider as a play on the swine flu outbreak. Don’t get me wrong, I’m not trying to make light of this subject at all and I grieve for those hundred plus people who have already succumbed to it. Let’s hope and pray that this outbreak can be contained and it doesn’t turn into a pandemic health crisis. Since we’ve been given another bowl of lemons, we could at least try to make some lemonade from it, no?

Below is a table of the major players involved in the development and manufacturing of flu-related vaccines, treatments, and tests. The major players are Gilead (GILD) and Roche (trades here as an uninspired ADR) who teamed up to make Tamiflu, and GlaxoSmithKline (GSK—also an ADR) which makes Relenza, an inhaler-based flu treatment. All of these stocks traded on the plus side but they weren’t even close to being the biggest winners—their smaller compatriots stole that show.

Topping the small-cap flu-related biotechs today were Novavax (NVAX) and BioCryst (BCRX). Both of them increased at least three-quarters in value and traded at astronomically high volumes. Both stocks gapped up on the open. From there, they meandered steadily downward closing the day near their lows. Novavax took out both its $1.75 and $3.00 resistance levels ending the day at $2.54. It’s next major resistance is at $4.00 (for a gain of 57% if it hits it).

BioCryst closed at $3.88. Next point of major resistance is at $5, or almost 30% above today’s close. Both of these stocks are short term plays (up to resistance) unless the swine flu crops up in more places. Let’s keep our fingers crossed that it doesn’t. Here are the weekly charts of the above two companies with resistance levels:

These plays are not for the faint of heart, but if you have a little extra mad money, you could do worse. The good thing is that they’re cheap compared with their big-pharma brothers. The bad thing is that I’m getting rather tired of drinking lemonade.

For further info on how these companies are positioned in terms of the swine flu, begin with this article that appeared today in the Associated Press.

Updates to Channeling Stocks Portfolio
Friday’s bullish action triggered stop-losses on five short positions in the Channeling Stocks Portfolio: DHR, RBC, ROP, SOHU, and UPL. Both the Channeling Stocks and the MANDA weekly tables will be updated later this evening.

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