It’s shaping up to be a red October…
Only a few days in and we’ve already experienced immense volatility, as the S&P 500 is on pace for its worst quarterly performance in well over a decade.
And while I wasn’t an active trader back then, I can tell you what I plan to do—whether the market turns south, it chops around, or even climbs back higher.
While I can’t control the future nor the headlines there are a few things I can—what I chose to trade and how much I intend to risk.
And if you’re like me, and you like money, then you’re going to utilize your number one profit bucket (that’s what I call my edge strategies — my highly profitable setups or pattern that have proven to be consistent winners).
Sure, I have added several wrinkles to my game since I first started trading. However, if you ask me what my bread and butter is, it’s trading biotech catalysts.
And you know what else?
Biotech stocks move don’t necessarily coincide with the rest of the market…
The stocks I’m trading are small companies that don’t impact the overall market… but can heavily impact your trading account if you catch a good one.
For the most part, I trade ones in the early stages and are developing new treatments.
Macroeconomic issues like the trade war don’t really affect the performance of small-cap biotech stocks. They are fighting a different battle.
And while October has been volatile for stocks in general… biotech stocks tend to be volatile all year round.
That’s because there are so many key events that can directly affect a company’s share price — data releases, FDA approvals, meetings, and so much more…
I’ve reeled off some of my largest winners from trading biotech catalysts.
And you know what?
The upcoming schedule of biotech events is jam-packed this quarter.
There will be plenty of explosive profit-taking opportunities along the way. That is, if you know how to spot and position for them.
I want to share with you my simple process that I follow to find potential high-flyers that I’d like to share with you. As well as, which biotech stocks have grabbed my attention and are setting up for potential plays.
Table of Contents
FDA Trades Are Heating Up
The reason why I’m going back to the well is due to the fact that the catalyst runup strategy is one of my best.
It’s my number 1 strategy that helped me turn $15K into more than $7M.
The compelling charm about my FDA Insider trading system is that it takes a complex area and packs it down to just 3 simple steps.
No joke.
The way I find my trades goes like this:
- Find a catalyst event. Find a fundamental reason the stock could go up, like an upcoming FDA approval date or data release.
- Pair the catalyst with a bullish chart pattern.
- Additional fundamental research. To stack the odds to your favor, defining logical areas to buy, hold, and sell zones… as well as other factors, such as insider buying.
So how does it work?
Let me show you a recent trade example.
Here’s a look at what I send to my clients for the stocks I’m watching.
Melinta Therapeutics (MLNT)
Catalyst Dates: October 24th FDA approval date for community-acquired bacterial pneumonia
Buy Zone: $2.20 to $2.60
Profit Zone: $3.00 or higher
Stop Zone: $1.85 or below
I know where I want to buy the stock, stop out, and take profits…
… and the catalyst date.
The idea behind the strategy is that traders will bid the stock up heading into the event, what I call the catalyst runup.
However, that doesn’t mean I’m just buying random stocks because they have an upcoming event… I’m highly selective and only trade the ones exhibiting my chart patterns.
With MLNT, it was the bull flag pattern.
Basically, I’m looking for a rise in the stock… followed by a period of consolidation… and the stock typically breaks out above the upper blue line.
Once I saw that… I decided to buy in the consolidation area (as shown in the chart above).
I actually felt strongly about the stock… and decided to buy more shares…
Just a few days later, I was able to lock in a $9,000 winner on MLNT, just by focusing on three simple indicators.
When I look down the catalyst calendar… there are so many to pick and choose from. Just take a look at the number of adcomm meetings over the next 2 months:
Source: FDA
That’s a lot of trades for us to potentially make money on… and that’s not to mention all the Phase I, II, and III data releases, as well as PDUFA dates on the docket.
Now is the best time to look to biotech stocks for opportunities… and I wanted to show you some of the stocks on my watch list…
This was sent to FDA Insider Clients on 9/30
Catalyst Swing Names (1-4 week holds) that I am watching
Melinta Therapeutics (MLNT)
Catalyst Dates: October 24th FDA approval date for community-acquired bacterial pneumonia
Buy Zone: $3.40 to $3.70
Profit Zone: $4.50 or higher
Stop Zone: $3.20 or below
Adamis Pharmaceuticals (ADMP)
Catalyst Dates: FDA approval for opioid overdose October 31st
Buy Zone: $.70 to $.80
Profit Zone: $1.25 or higher
Stop Zone: $.60 or below
Agile Therapeutics (AGRX)
Catalyst Dates: Advisory Committee meeting October 30th and FDA Approval date of November 15th
Buy Zone: $.90 to $1.10
Profit Zone: $1.40 or higher
Stop Zone: $.80 or below
If you want to learn more about my number 1 profit bucket and how to start profiting off catalyst runups using my simple process… check this out.
[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