What a day yesterday for the biotech sector!

The XBI closed the day up 4.65% after gapping up and breaking out the daily consolidation.

In the above chart, from Finviz, you’ll notice that the XBI, in the short term, appears to have shifted momentum, and for the time being, the bulls might have regained some control.

The XBI spent time consolidating around $90 the past two weeks after experiencing a steep decline beginning in November last year. 

This is a move I welcome with open arms because it might positively affect small-cap biotechs in the sense that the overall sentiment might shift to favor the bulls.

Now that the XBI closed above the 20d MA yesterday, from now on, I would like to see the ETF continue to base over the 20d MA and then attempt to reclaim the 50d MA, which is currently around $104.

With the biotech sector possibly firming up, one stock has caught my attention after closing green yesterday and breaking out of a consolidation.

Aeterna Zentaris (AEZS)

I have this stock on my radar for several reasons, gang.

Firstly, I like the pattern on the daily chart.

Secondly, I like the anticipatory aspect of this play because the stock has an upcoming catalyst.

So let’s unpack the above.

Yesterday, AEZS closed the day up 16.57%, according to the above chart from StockCharts.com.

Before I unpack my thoughts, let’s quickly cover the basics.

What is AEZS?

AEZS is, according to Yahoo, a specialty biopharmaceutical company that engages in developing and commercializing therapeutics and diagnostic tests.

Key Stats, from Finviz:

Market Cap: 48.52M

Float: 121.21M

Short Interest: 2.98%

Average Volume: 1.13M

Based on the above chart, I can see that the stock traded just over 1.6M shares yesterday. That amount is greater than the stock’s average volume, which I view as a signal that the breakout experienced yesterday might be sustained.

Historically, I do not love the chart because, as you can see, the stock has been in a lengthy downtrend.

However, what I like to look for with biotech stocks, is upcoming catalysts that might result in a trend change.

The upcoming catalyst for AEZS:

AEZS will present at the 2022 BIO CEO & Investor Conference between February 14 and 17.

My Thoughts:

With the upcoming catalyst approaching, yesterday might have been the first sign of a potential curl higher into that event.

Since November of last year, the stock has been steadily declining, and yesterday I noticed the first sign of a potential trend breakout after the stock broke above the 50d MA.

If this move continues over the next few days, I think it could trade towards those two circled zones, high $0.40s and $0.50s.

So this is a stock that I am watching for a potential trade. 

If the stock can pull back into the 50d MA, around $0.39, and base, I might look to get long targeting the zones mentioned above.

Jeff Williams

Jeff Williams is a full-time day trader with over 15 years experience. Thousands of entry-level and experienced traders alike – day-traders and swing-trade small cap stock traders – credit Jeff with guiding them to turning small accounts into big accounts.

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