The Deipnosophist

Where the science of investing becomes an art of living

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Location: Summerlin, Nevada, United States

A private investor for 20+ years, I manage private portfolios and write about investing. You can read my market musings on three different sites: 1) The Deipnosophist, dedicated to teaching the market's processes and mechanics; 2) Investment Poetry, a subscription site dedicated to real time investment recommendations; and 3) Seeking Alpha, a combination of the other two sites with a mix of reprints from this site and all-original content. See you here, there, or the other site!

09 May 2007

Thar she goes!

Although not one of my Core-9 opportunities, oft-recommended opportunity, Isis Pharmaceuticals/ISIS looks set to explode upwards through multiple levels of resistance when today's trading begins.

First, the news released ~30 minutes ago (at 423am pdt)...

Bristol Myers Squibb/BMY and Isis Pharmaceuticals/ISIS announced a collaboration to discover, develop and commercialize novel antisense drugs targeting proprotein convertase subtilisin kexin 9, or PCSK9, for the prevention and treatment of cardiovascular disease. PCSK9 helps regulate the amount of cholesterol in the bloodstream. As part of the collaboration, Isis licensed to Bristol-Myers Squibb exclusive access to its PCSK9 research program.

Bristol-Myers Squibb will pay Isis a $15 million upfront licensing fee, and will provide at least $9 million in research funding over a period of three years.

Isis will also receive up to $168 million upon achievement of pre-specified development and regulatory milestones for the first drug in the collaboration, apart from royalties on sales of products.

Next, the lightly annotated chart...

[click on chart to enlarge]

The line of declining tops (shown) lies at $10.28, which also happens to be the intra-day high on 5.2.2007, a reversal day from the day prior. I have articulated the important resistance points in previous posts, so will not belabor those data points in this post.

No, what I hope to share here -- i.e., what I hope to teach and for you to learn (finally, the lesson) -- is that there are two ways of trading (not investing):
1) Purchase certainty in the form of buying breakouts. But if this is your methodology, what do you do when there is no (immediate) follow-through, and the share price declines from your purchase point?
2) Purchase uncertainty in the form of buying (short term) price declines. If this is your methodology (and it is mine), then when these moments of punctuated equilibrium occur, such as now for ISIS, you profit.

This argument is really about more than merely dueling methodologies. It touches upon your time frame -- trader or investor? -- and goes to the heart of what drives your investing patterns. And, in the end, your success. I admit this discussion is brief, barely touching upon the core truths, but I have articulated these points so often and in so many ways as to be blue in the face with bated breath. Will real time examples of consistent success using my methodology help you to achieve the same? I can only hope.

For ISIS, what remains is the chart pattern to fulfill itself in full, which appears likely at the time of this writing. It will be interesting to note the total number of shares that trade in pre-opening activity (adding Island and other ECNs to the mix), and then, most important, today's regular trading session... and closing price and total volume. (I emphasize regular hours activity because pre-open and after-hours trading are too thin, and thus subject to wild swings. And, yes, manipulation.)

I suspect it all will be quite bullish. But then I have thought so for some time. Today looks to be only one payday of many for this opportunity as its long term (years) chart pattern begins to align for much higher prices.
-- David M Gordon / The Deipnosophist

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