Stocks are up this afternoon, as they look to close out strong, and post some of the best weekly gains we’ve seen all year.
The catalyst: bad news.
The jobs numbers were awful this morning… which helps the case for the Federal Reserve Bank cutting interest rates this year. As of now, the market is predicting a 36% chance of a rate cut in June, and a greater than 75% chance of a cut in July.
Make no mistake about it… this is still a news-driven market.
And to be perfectly transparent, I don’t try to trade macro events because I don’t think that’s where my edge is…
Believe it or not… some stocks aren’t moving off trade headlines or dovish fed comments…
… and those are the types of trades I’m going after right now…
… and having a great deal of success.
For example, it was a relatively slow week for me… that is… until one of my FDA Insider Alerts trades hit the jackpot!
It was a classic catalyst runup … a strategy that I teach in my advanced biotech trader course, which you get for free when you’re a member of FDA Insider Alerts
(If you need a place to start then my FDA Insider Alerts is what I recommend, click here to find out more)
That said, I am going to walk you through the trade in vTv Therapeutics (VTVT) by explaining the play, how I found it, and how I decided on entry and exit points.
Table of Contents
Catalyst Runup Strategy Has Been Working Well
In my last post, I talked about reviewing your trades so you can maximize your profits.
Now, if you don’t know, one of my best trading strategies is my FDA catalyst runup strategy… if that sounds unfamiliar to you, or a bit complex… don’t worry, it’s really not.
Basically, what I’m looking for here is an upcoming catalyst in a biotech stock, and pair that with a chart pattern I like.
Why’s that?
Well, generally, the stock runs up into the catalyst event… and if you’re able to spot these, you can realize large gains.
Now, we’re going to get right into things here and go over not one… but two recent trades I had using this strategy… in the same stock.
FDA Catalyst Runup Strategy
For the most part, I like to use BioPharmCatalyst to spot upcoming catalyst events for biotech stocks.
You see, I look to see what the upcoming catalysts are… if I think the stock could run up into the catalyst… then I’ll look to the chart, and typically, I scan for stocks to trade using Finviz.
Now, you can scan for stocks first and then look to see if they have catalysts… or look for catalysts, then look at the chart setup.
For example, one quick screener I like to do is this (just hit screener when you go to Finviz.com):
Source: Finviz
Now, under the screener, you’ll see a tab for “Charts”.
Source: Finviz
This allows me to quickly scan through dozens of stocks and find patterns that I like.
Thereafter, I develop a trading plan and put it on my watchlist, which I send out to clients regularly… it’s exactly how I found winning trades in VTVT.
For example, I sent this out to FDA Insider Alerts clients a few weeks ago…
Notice how the stock caught a pop and got right into my buy zone – between $1.25 to $1.50.
Why did I like it at that level?
Well, check out this daily chart in VtV Therapeutics (VTVT).
Notice that blue line there? Well, that’s support.
I want to be long the stock as close to support as possible, and stop out somewhere below that.
Now, I don’t just send these plans out… I actually trade them and let clients know exactly where I’m buying the stock.
Now, I actually bought more shares… because I felt really strongly about this stock running up into the catalyst.
Just a few weeks later, I took some profits off the table – locking in $4K!
Thereafter, I took the rest off the table…
Remember, whenever you find a strategy that’s been proven to work… you press it.
I went back to the well and decided to buy more shares, and of course, I let my clients know about the trade.
Just a few days later, the stock was up 30% in the pre-market, and I sold most of my position for $7,200 in realized profits! Of course, I let clients know I was getting out of the position.
Well, what happened here?
I was anticipating the stock to have a press release or some type of data about its diabetes treatment trial…
… and they reported positive results in the morning.
More specifically, the headline was:
“vTv Therapeutics Announces Positive Topline Results from Part 1 of the Phase 2 Simplici-T1 Trial in Patients with Type 1 Diabetes”
Now, if the catalyst runup strategy is still unfamiliar to you… or if you just simply need a refresher on how key data releases affect biotech stocks, click here to find out more.
[Ed.note: Kyle Dennis runs BiotechBreakouts.com. He is an event-based trader, who prefers low-priced and small-cap biotech stocks.Source: BiotechBreakouts.com | Original Link