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Cempra: Currently Breaking Out Of Consolidation

By Suz SmithStock MarketsFeb 23, 2015 04:04AM ET
Cempra: Currently Breaking Out Of Consolidation
By Suz Smith   |  Feb 23, 2015 04:04AM ET
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Cempra (CEMP) specializes in treating critical bacterial infectious diseases. It has a number of Phase 3 clinical candidates specifically targeted to kill drug-resistant bacterial infections in the hospital and the community. As widespread use of general antibiotics continues, we are seeing an increase of "super-germs" or infections not responding to existing medications. One of CEMP's products Solithromycin is in Phase 3 clinical development for community acquired bacterial pneumonia which kills in excess of 25,000 people per year (Wikipedia). CEMP does a lot of very complicated developmental work which I will not get into here, but what interests me is the chart. Let's take a look:

CEMP Daily
CEMP Daily

Looking at the chart we can see that CEMP created its first base between October and December of 2014 before staging a massive run up that essentially doubled its share price. Since Jan 2015 this stock has been working on its second base and currently appears to be breaking out of consolidation. If you look at the bollinger bands you can see the bottom band is relatively flat while the top band has started to flare open creating space for price to move upwards. Moving down to the MACD, we can see that the black line has crossed the red line creating a buy signal and the histogram is stair-stepping up - both bullish signs. Finally, looking at the full stochastic, we see that this chart is not yet overbought, but when it gets there it can stay there for quite some time.

Biotech stocks are not for the faint of heart as they are ruled by trial results, FDA approvals and are notorious for doing secondary offerings when you least expect them - but when you choose a good stock with a viable product and trade it technically it can earn handsome profits for your portfolio. As the bid/ask spreads are so wide on CEMP I would trade it in common vs. options.

CEMP is scheduled to report earnings on February 25, 2015 after market close. As always please use proper sizing for your portfolio and engage in the use of stops to help contain losses.

Full Disclosure: I own CEMP common

Cempra: Currently Breaking Out Of Consolidation

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Cempra: Currently Breaking Out Of Consolidation

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