News plays can be explosive…and dangerous of course.
That’s why I don’t trade them on the news alone…I always pair them with chart patterns and technical analysis.
A good example of that came yesterday when NeuroMetrix Inc. (NURO) blasted off on a company press release about one of its products…
Shares of NURO rocketed from 3.26 Monday to close at 10.04 yesterday… up 208% on a record volume of 228 million shares.
Compare that volume to the under 100k shares traded the day before, and it’s a massive difference.
And this morning, NURO continued to catch a squeeze to over 34 at this moment….now up over 900% from Monday’s close.
I’m going to show you how I personally found an end-of-day trade on this rocket ship, as well as how I use chart patterns to find entries in news plays.
Neurometrix Inc. (NURO)
NeuroMetrix (NURO) is a healthcare company that develops wearable neuro-stimulation therapeutic devices and point-of-care neuropathy diagnostic tests to address chronic health conditions, including chronic pain, sleep disorders, and diabetes in a non-invasive fashion.
In a press release yesterday, NURO announced the FDA gave a “Breakthrough Designation” to the company’s Quell device for treating fibromyalgia in adults.
From the press release: “The FDA Breakthrough Device Program is intended to help patients receive more timely access to breakthrough technologies that have the potential to provide more effective treatment or diagnosis for life-threatening or irreversibly debilitating diseases or conditions. Under the program, the FDA will provide NeuroMetrix with priority review and interactive communication regarding device development, through to commercialization. In addition, there are government policies and programs under consideration that, if eventually adopted, may facilitate Medicare reimbursement for FDA Breakthrough Devices following marketing authorization.”
You saw the move on the daily chart above…to see how I found a trade in NURO, take a look at the intraday chart from yesterday.
The press release came out in the morning and the stock was trading in the 4’s when I added it to my midday watchlist.
What I liked was the higher highs and higher lows pattern throughout the day. This is a classic stair step pattern forming on the intraday chart below.
I didn’t personally take a trade until the end of the day though…first thing after the close to be exact.
At this point NURO was clearly making higher highs and higher lows, but will it continue…
I watched at the end of the day as the stock pulled back making another higher low at 9.21…looking to take a trade as long as it stays above 8.
I found my opening at 9.72 just a little after the closing bell yesterday, looking for NURO to break above 12 and make another higher high.
It didn’t take long as the stock ripped up to 13.71 and I exited at 13.06 on the way. It was a basic setup that went according to plan.
Could I have seen more of this momentum?
Absolutely…but my trade plan was to buy on a move to a new higher high. And that’s what I did, taking the stock from 9.72 up to 13.06…my trade reached the target, so I got out.
That’s trading. Have a plan and stick to it.
I can’t complain about that outcome…even as I watch NURO continue to rocket this morning.
So what’s the deal with NURO today?
The fact is Quell is a transcutaneous electrical nerve stimulation (TENS) device used to treat pain and already for sale online. And when it comes to TENS devices, there’s a lot of competition out there…
So the idea here is to get further approval from the FDA as a treatment for fibromyalgia and potentially get into government programs which may facilitate Medicare reimbursement. This will open a more specific market and set the product apart.
However, from what I gather at the moment, there are quite a few more steps to go…for instance, this is a note taken from the bottom of their press release:
“Note: The use of Quell for fibromyalgia is investigational and has not been cleared or approved by the U.S. FDA. The safety and effectiveness for this purpose have not been reviewed by the FDA.”
The company stated that moving forward with the designation could position them to potentially launch Quell for the use in fibromyalgia treatment in the second half of the year…so there’s that.
And while the Breakthrough Designation is one step in the right direction, something that’s more important right now is the company’s earnings release which is scheduled for tomorrow morning.
Holding a stock into a corporate earnings report is generally thought of as risky and it’s not something I will generally get caught up in…so that’s another reason for me not to be holding on for dear life.
But I will be paying attention to see how the stock reacts given the huge spike on yesterday’s press release.
The other factor pressing NURO higher is the low float of just over 3 million shares…and with that, the Reddit community has taken up interest in the squeeze pushing it to crazy new heights.
Watch out for corporate earnings tomorrow morning…