Biotech Chart Analysis: SQNM, CTIC, JAZZ

The recent news from biotech companies Sequenom Inc. (SQNM), Cell Therapeutics, Inc. (CTIC), and Jazz Pharmaceuticals, Inc. (JAZZ) has made for some great trading fuel, but their charts themselves are quickly becoming the key story now that the news has matured.

We first reviewed Sequenom Inc. (SQNM) as a potential speculative buy back in early June. A strong breakout effort in the middle of a dead period for the stock suggested the bulls were interested again. Since then, Sequenom shares have gained nearly 40%, so the interest wasn't hollow.

From a chart technician's point of view, the stock is attractive for one big reason... the buyers are persistent and bold. SQNM has not made a direct beeline from May's lows to the current price of $6.22. Rather, the bears have had chances to send the stock lower, but the bulls kept buying on the dips. The result? Higher highs and higher lows.

Part of the recent rally stemmed from Sequenom's AttoSense test.

The new diagnostics test, when compared to an older DNA-based HPV test called Hybrid Capture 2, found that 15% of women who tested negative on the Hybrid Capture test had "clinically relevant viral loads". Moreover, almost half of the women who tested negative with the Hybrid Capture 2 actually had some level of HPV that was missed.

There's still no word about the retest for its Downs Syndrome screening device. Its first round of testing may have been faulty and misleading, which was the reason for the big plunge in late April. However, given the strong buying volume we see behind the rallies and the mild volume we've seen on the pullbacks, the market is mostly betting in favor of the company and its second Downs Syndrome screener tests.
______________________________________

Sign-up to Receive Future Commentary
and Trading Alerts on SQNM, CTIC, and JAZZ.
______________________________________

Cell Therapeutics, Inc. (CTIC) may well be on the verge of a bullish breakout, but the odds of a breakdown are just as good.

CTIC shares have formed the classic wedge over the last two months... lower highs and higher lows that form a triangle shape on the chart. The break - in whichever direction its destiny lies - is apt to come soon, as the triangle is coming to a point and there's no room left to bounce around inside its boundaries.

The hot button for this company as well as the stock has been Pixantrone - Cell Therapeutics' test treatment for non-Hodgkin's lymphoma (NHL).

Pixantrone was submitted for approval to the FDA in June, and more recently the company began the process for EU approval by receiving permission from the European Medicines Agency ("EMEA") to submit Pixantrone for a Marketing Authorization Application ("MAA")....the first stage of the EMEA's centralized approval procedure.

The fact that the stock barely budged on the EU news back on July 29th suggests the market has just gotten bored or skeptical of CTIC shares. As such, if the last line of defense - the rising support line - fails to hold shares up the next time it's tested, a small stumble could quickly turn into a major fall. Be cautious. (Conversely, a break above the upper wedge line has a modest shot of generating some bullish momentum).

Though overbought, and with the bullish volume fading, Jazz Pharmaceuticals, Inc. (JAZZ) shares have remained positioned for another leg - or perhaps several legs - higher.

JAZZ is a stock that established itself as one that starts and stops pretty dramatically; we saw a big burst in June, and then no movement at all for nearly six weeks.... than another big move out of nowhere early last week. Since then, the same as before.... flat to no movement.

The lesson to be learned is patience, though it's also important to note that the July surge was actually fueled by several days of support at the 20 day moving average line (not seen here). If/when it catches up with JAZZ shares, keep your eyes open for a repeat.

A case could also be made that Jazz Pharmaceuticals shares are jumping - bullishly so far - from one triangle to the next. The newest wedge isn't well-defined yet (if it is one), but that could accelerate any impending move from the stock if one side or the other was broken.

One caveat for the bulls... there wasn't a great deal of volume with the recent push higher. This suggests interest is mild so far.

If you liked these stock trading ideas, then you'd love our free e-newsletter. Delivered 1 to 2 times per week, it's full of specific, actionable trading recommendations, complete with entries and exits. Sign up today.