Don’t worry. I am not getting all philosophical with you.
Last week, ATYR Pharma (NASD: LIFE) was up 88.14%. A move this significant warrants a closer look into the stock.
As the overall market experienced a pullback last week, which has continued so far into this week, many small-cap names showed relative strength.
I have written about stocks recently, such as CEI and LPTX, which have held up firmly and displayed relative strength to the overall market. LIFE is no different, as the stock held onto its gains last week while the overall market pulled in.
What is LIFE?
LIFE, according to Yahoo, is a clinical-stage biotherapeutics company. The company engages in discovering and developing medicines based on novel immunological pathways in the United States. The company’s lead clinical product candidate is ATYR1923, a selective modulator of NRP2 for treating patients with severe inflammatory lung diseases, including interstitial lung diseases (ILDs) and severe respiratory complications caused by COVID-19.
Market Cap: 173.62M
Float: 13.74M
Short Interest: 3.02%
Average Volume: 4.85M
Last week, as I mentioned, the stock increased by 88.14%. On the month, the stock is up over 120%, and 165% year to date.
The stock has an average target price of $16, set by analysts that cover the stock. This target price is considerably higher than where the stock closed on Friday.
What was the catalyst last week?
ATYR Pharma announced positive data from phase 1b/2a clinical trial demonstrating consistent dose-response for ATYR1923, the company’s lead therapeutic candidate, in pulmonary sarcoidosis.
The news resulted in an explosive move to the upside. The stock opened the day up at $6.30 and closed the day near the highs, at $9. The stock traded an incredible amount of volume. Over 110M shares were traded, compared with the stock’s average volume of 4.85M.
Key Levels
Since breaking out on positive news, the stock has managed to hold up impressively near the highs.
As the stock has spent time consolidating since the first leg up, key levels have become clear.
Support is firmly at $8. This level of support was previously the resistance from day 1, which turned into support after the stock made a higher low at this price on a higher time frame.
$10 – $10.50 is resistance. This level is clear resistance from the previous two days of trading. $10 – $10.50 is also technical resistance from the bullish flag on the chart.
What’s next for the stock?
With the above levels in mind, I have formulated the following game plan for the stock.
Support for the stock is firmly $8. Therefore, as long as the stock remains above this level, without a negative catalyst hitting the headlines, the bulls will still be in control and confident.
If the stock breaks above resistance of $10 – $10.50 and then manages to hold firmly over $11, this might signal that a leg higher could happen, and the potential for a short squeeze could exist.
If the stock begins to consolidate near support and then break below $8, the bull thesis will no longer be valid in the short term. This move might signal a change of character and momentum in the stock.
It is also essential to maintain an overall view and interest in the market, as it is currently experiencing a pullback. The market pullback’s psychology shift and tail-wind effect might spill over into these setups, affecting the upside potential.
