Don't shoot the messenger, but if Vringo, Inc. (AMEX:VRNG) and Cardiome Pharma Corp. (NASDAQ:CRME) get shoved just a little farther in the wrong direction, a small stumble could turn into a big tumble.
Just to be clear, this is a trading look at CRME and VRNG, and NOT and investing look. Cardiome Pharma and Vringo both have their long-term pros and cons, and all those pros and cons have been will-discussed (and in the case of VRNG, they've been hotly-debated). But, those are all matters that will only permanently get priced into the stock's value over time. What I'm talking about is a short-term, "in the meantime" technical look that could cause some frustration for unsuspecting long-termers that would otherwise wake up surprised to see their investment losing value in a hurry.
For Cardiome Pharma, the line in the sand is $0.40. That's where shares have made their lows for the better part of the year. Although the floor is still intact (plotted in red), the frequency with which CRME is testing that floor is increasing. The fact that we've seen a string of lower highs since early February is only fanning those flames. If shares reach to $0.39 or lower - or more specifically, if the majority of traders see CRME reach $0.39 or lower - that could be enough to spook the already-nervous shareholder base, starting a chain-reaction of selling and really driving the price down.
For Vringo, that line in the sand is around $2.80, as plotted in red on the larger chart below.
Though the stock has had as few moments of glory over the past several months, none have lasted, and the $2.80 seems to be the "home base" ... at least for the time being. If you look closer, you can see VRNG is also driving into that floor with a series of lower highs. It's a proverbial slow death - a death so slow it's almost imperceptible. If the support at $2.80 does snap though, the pace of death could quicken quite a bit.
Vringo is, in simplest terms, an IP company. It owns patents, and monetizes those assets my negotiating or litigating royalty fees if a company uses them (lawfully or not). Though it technically won such a case against Google in the latter part of last year, the dollar amount of the award was disappointing, deflating hopes that future cases would be significant victories... if victories at all. More than anything though, what's proving to be a drag on this stock is a lack of news - it doesn't have many bargaining chips or potential defendants left to tap.
As for Cardiome Pharma, it's a drug maker. Its flagship product is BRINAVESS, for the conversion of recent onset atrial fibrillation to sinus rhythm in adults. It's currently marketable in the European Union, Iceland, and Norway. Similar drugs are in the pipeline. Catalyst alert: Its Q3 earnings call is on the 15th.
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