What a market we find ourselves in for biotechs! There is currently an abundance of opportunities each day. It is a brilliant environment for you to not only trade but also to LEARN and STUDY.
Speaking about a hot market for biotechs, the latest name to attract the eyes of many is EyeGate Pharmaceuticals (NASD: EYEG)
EYEG, per their website, is a clinical-stage pharmaceutical company developing and commercializing products for treating inflammatory and immune diseases.
Market Cap: 23M
Float: 6.86M
ATR: 0.25M
Average Volume: 28k
Short Interest: 0.65%
Shares of EYEG soared yesterday in the after-hours trading session. Trading from $3.10 to a high in the after-hours of $9.85 before closing at $7.60. At the time of writing, the stock is currently trading at $8 in the pre-market.
What is the Catalyst?
The company announced that effective immediately, it has named a new CEO.
Brain M Stream, Ph, D., Co-Founder, Director, and the former CEO of Okogen has been appointed as permanent president, CEO, and board member.
In addition to that, the company has also entered into a letter of intent to acquire Bayon Therapeutics, a private ophthalmic specialty pharma company.
Read more from the press release here.
Where Could the Stock Go?
I always look far back on the daily chart to identify key levels of resistance and potential target zones for profit-taking. It is essential that you take note of days the stock did abnormal volume, how it traded on that day, and whether it closed at the highs or lows.
You can see that we have two critical levels of resistance from the higher time frame chart. The last time the stock gapped up and did abnormal volume was on 12/21/20. The stock traded 40m shares and closed at the low. The high from that day was $8.18, and therefore $8 is an area of interest.
On lighter volume, the stock made a high of $12.89 at the end of 2019. This area of $13 could now act as a critical resistance and potential profit-taking zone if the stock approaches it.
From the after-hours yesterday, we will use the high of $9.85 as immediate resistance. Above that area, the stock could quickly head towards the $13 area pointed out above. $6 may act as support if the stock pulls back off the open.
Once the stock opens, if it can hold above the VWAP and immediate resistance levels from the pre-market of $8.50 and then $9.85, we could have a severe runner on our hands.
I love that this stock has such a small float. This means that the stock will likely be volatile and could go a lot further than you think. If shorts are able to get a lot of locates then that could heavily increase the chances of a major short squeeze.
Bottom Line
With a small float, catalysts, and clear support and resistance levels, EYEG could provide bulls with a tremendous long setup today. If the stock holds above support and then breaks over resistance, we could see many more low-float biotechs pop up in sympathy.
