As shown below, a CELG day-trade was executed on Friday. It was certainly not meant to be a day-trade. CELG opened on a down-gap and I waited for a bounce to enter a short position. Then, as the day progressed, the bounce became stronger and it looked as if the stock could bounce so hard as to draw a reversal candle by the EOD. I also looked at other Bio stocks: VRTX, GILD, REGN, BIIB, MDVN, AMGN, ALXN, VRX, AGN and PCYC. Except for PCYC, they were all doing poorly as they had been hit by the possibility of a change in Medicare coverage for highly priced newly FDA approved drugs. The sell-off felt sector based "manufactured" with a high-level of Bio-tech linked article intended to raise fear.
I also saw that PCYC - whose business model is to sell highly priced drugs that must be covered by the health care system - was attracting money (see below.) All in all, this meant that we could easily get a sector reversal on Monday. All these stocks are in fact "good stocks." They are simply guilty by association.
In other words, I chickened out of my short CELG position and I was simply lucky that the trade ended with a little gain. I will not chase this sector down, but if it bounces, then shorting will be easier. CELG could be a better short at $153.
Below is the list for today. You will note that there are two long candidates that are in the Bio-tech sector: VNDA and ANIK.
They do look attractive, but if there is a continued sell-off, they will go down with the rest of the Bio-tech sector. Hence, the buy prices are set rather low with only tiny probabilities to be reached today.
These two trades will be difficult to catch, not only because they are far away, but because if they reach these levels, it will be sheer sector panic and "catching a falling knife" type of trade.
REG looks easier to trade on the long side: we would buy a pull-back to the 50MA with a stop below Thursday's low. This is a really standard setting with only a 12% probability to be able to enter the trade.
Let's now look at the potential short trades.
For FDX, the list shows a 100% probability, which simply means that the price is now above the short price. The goal is to short weakness here or simply a break below the short price instead of a bounce to the short price zone, as is usually the case with my settings.
FDX is a strong company that has been acting well during the bull market. It is partly linked to Amazon's fate. It has hiked its prices recently and so did AMZN. So if AMZN gets a hit, I believe that FDX could be "stabbed in the back." Hence, I will have a stop limit short price set.
RIG is the famous driller that was partly responsible for the BP gulf debacle. RIG makes and rents deep sea drilling platforms, a business that can be hit if oil prices fall. RIG has been weak for a very long period and is now bouncing on continued EV weakness. A bounce to resistance is a good place to short, especially if oil weakens.
The problem is that oil looks relatively strong. Hence, the short RIG idea is circumstantial at best because its price will probably move in lockstep with oil prices.
ENDP is a pharmaceutical that looks as weak as the rest of the group. It is close to the 50MA and could break below the $70 level. My hope is to be able to enter one long and one short in the Bio-tech/Pharmaceutical sector, depending on how the whole sector acts in the first hours of trading. This is in no way an easy trade, and it might be safer to set a stop limit below the $70 level.
I believe that BIDU, LEN and NDAQ offer more traditional and easier types of short settings.
