Right now stocks are moving on fear and uncertainty. And of course, that sends volatility through the roof.
It also means that most stocks will be correlated. For example, it’s not uncommon to see every sector trade lower when we have macro news dominate the stock market–like it is now.
So how can you win in this market without getting sucked into all the macro news we’re seeing?
Simple.
Trade ultra-specific catalysts– like biotech stocks
For example, while most traders were dodging bullets, watching their screen flash red, and how much lower can this market go– I was busy taking profits to the tune of $11K.
(Tired of trading a macro news-related market? I don’t blame you. That’s why I have been sticking to biotechs and booking profits along the way. Ready for my next alert? Join Now)
Now, I’m going to share with you:
- What I saw in NBRV and FOMX
- The trade setup
- The reason why I got in
- And how you can you repeat this strategy over and over again.
Table of Contents
How I Made $11K Using This Trade War Proof Strategy
It was another wild Monday for stocks and traders have been struggling to figure out where the market is headed… not only that, there’s so many landmines out there that you need to be able to pivot once something isn’t working.
In this news-driven market, I know trying to play large-cap stocks or trade ETFs is going to be difficult… instead, I trade a market that hasn’t been getting too much attention from the mainstream media.
I’m taking on catalyst event trades, more specifically, those surrounding U.S. Food and Drug Administration (FDA) data releases in biotech and pharmaceutical stocks.
Why?
Well, I know that these catalyst event trades won’t be impacted by macro variables… like the U.S. – China trade war, the Chinese yuan weakening to levels it hasn’t seen since 2008, or concerns about slowing economic growth.
You see, these biotech and pharmaceutical stocks are typically very small and traders are solely focused on company-specific news.
Think about it like this, if a biotech company is in the research and development (R&D) stages and primarily looking to get its treatment approved by the FDA… traders will only be focused on company-specific news, not what’s going on around the world.
My strategy is super simple, yet highly effective.
All I have to do is spot the catalyst ahead of time, look at the charts and come up with a trading plan.
For example, I look to BioPharmCatalyst for their FDA Calendar. Basically, this calendar shows me any upcoming events that could potentially move a stock.
Once I find the catalyst, I look at the charts. If I see an upcoming catalyst, I want to see what the price action has been like over the past few days or weeks… and if I see a bullish setup with an upcoming catalyst, I’ll look to build a position.
For example, I actually spotted an upcoming catalyst event last week in Nabriva Therapeutics (NBRV). The company is expected to have an FDA approval date in mid-August… and I actually spotted a bullish pattern.
The stock has been consolidating and I actually saw it pull into an uptrend line, which was where I bought shares. At that level, I figured it was a good risk-reward, and my profit target was $2.40 or higher (the resistance level).
While the market was selling off yesterday morning… NBRV was actually above my profit target and I decided to take everything off the table. Not only that, I was taking profits in another catalyst trade in Foamix Pharmaceuticals (FOMX).
My catalyst runup strategy is not only effective in any market environment, it’s scalable and repeatable.
With FOMX, the trade was more or less the same. I found a catalyst event and noticed a bullish chart pattern. However, there was actually more bullish news in FOMX the day that I bought shares.
FOMX has a catalyst in October (FDA Approval date), so I was a bit early. However, the company got investments from Perceptive Advisors and Orbimed, which are two of the best biotech funds… so I bought shares after it had a bullish gap up.
Keep in mind, I bought shares on July 30, just before the market started to pull back… and I held through all that volatility, but look at what FOMX was doing…
It didn’t care what the market was doing and just kept running higher.
The reason why I was able to hold onto these stocks and still take profits when the market was selling off?
Well, my strategy is not really correlated to the overall market and macro variables… instead, the stocks I’m trading move on company-specific news and charts.
If you’re looking for a new way to protect your portfolio and start making money when stocks are volatile (heck, in any market environment), then you’ll want to check out FDA Insider and Sniper Alerts bundle, and so much more… and I’m offering it at the lowest price for a limited time.
[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