Sheff Commentary 8/12/11 Lessons learned past few wks from this market volatility:
Important to own biotechs w/ high chances of receiving approval if you are targeting a PDUFA date. It is risky to hold crappy stocks, close to the PDUFA date, for a pre-PDUFA move higher thinking you will dump before that approval date. ANX is the perfect example when a CRL can come wks earlier than the PDUFA. The reason ANX moved to $4 is because Rodman had a $16 price target on the stock. $4 was only 25% of the $16 target price & now it sits at just over $1.00. Price targets don't carry a lot of weight in this market. Read the fine print & always determine if that financial firm was involved in a financing first.
Speculative biotechs w/o pending catalysts are risky trades but can be profitable if you just trade them & don't hold them for long periods (30-60 days). The one that has burned me the past 3 wks was CYCC. Thought the offering at $1.20 would keep the share price near that level & it never did as the market turned south. The same thing occurred with ALXA. They fell through their offering at $1.36. Still holding ANDS (.69) here from my $1.00 entry. I am down $3,100 from my $1.00 entry. Another stock that I should have traded accordingly as it broke lower than my entry. Market cap is currently 37m and they have 32m in cash w/ no debt. They have catalysts moving forward at end of Q3 & Q4 & that is why I have not sold. I may average down at some point. Holding SNGX & IGXT as well. Both have solid catalysts end of year.
Will have an even stronger focus on biotechs that are cash-rich companies that are less likely to go to the market for financing. Also companies that have high probability of approval. Will establish a position trade the PDUFA. As the date gets closer I will hold a secure position. Moving forward...I will be trading these biotechs more & will be less likely to hold for longer periods of time in this market. I am also going to sector trade and make a few more trades out of biotech/pharma even though bio will be my primary trades (90%). I may look for some low-priced p/e high dividend plays to put some cash (ex: banks) for some swing trades. I will also be trading bigger market cap biotechs as they tend to not be as volatile as the smaller cap. I like both regardless. There are plenty of opportunities in the market even with the negative sentiment regarding the worldwide economy.
Finally is that I have at least 75% of my portfolio in cash. 25% is enough for me to play with in this market. I will settle more for smaller consistent gains (10-20% than wait for big gains (30-50%) as the bigger gains are occuring few & far between. I will be making some changes to my IBOX this weekend with regards to a new portfolio I will be trading from soon. It will be a smaller cash account with the same goal of solid returns. It will definitely be a swing trade account where I will lock in smaller gains w/ the goal of consistent returns. Stay tuned!!
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