RTK, CXM, DVAX: Had Their Run-Ups, Correction Time Now

Rentech Inc (AMEX: RTK), Cardium Therapeutics Inc (AMEX: CXM) and Dynavax Technologies Corporation (NASDAQ: DVAX) are from different industries but they have a lot in common. For one, these stocks are traders’ favorites and thus, record heavy daily volumes in excess of one million shares. Another factor common in them is that they have all come under pressure after posting significant gains in the early part of the month. The stocks appear to be in the early stages of a fizzling rally and thus, investors should profit and becomes bearish on them.

The stock of California-based synthetic fuel and electric power company Rentech Inc (AMEX: RTK) posted an increase of 82 per cent between October 4 and 18, but has lost nearly 11 per cent since then. No change in the fundamentals of the company is reported lately, but it is just that the stock went up so sharply and so quickly that a technical correction almost became a necessity.  The stock may bounce back again but it has no significant support at lower levels so it may continue to fall further. The risk reward ratio in this stock is currently skewed in favour of short positions.

Shares of biotech firm Cardium Therapeutics Inc (AMEX: CXM) spiked substantially on October 10 after the United States Food and Drug Administration (FDA) cleared Cardium's Excellagen wound care product for the management of diabetic foot ulcers for US marketing and sale. While the stock crossed $0.55 in the ensuing rally, it has retreated to $0.42 now. There appears to be more downside in the stock before it settles in the range of $0.30 to $0.35. Considering the potential downside, investors can create fresh short positions too.

Similarly, shares of California-based pharmaceutical company Dynavax Technologies Corporation (NASDAQ: DVAX) started their rally from $1.75 early this month and moved all the way to $2.77. However, the stock is looking choppy now after this stellar performance and appears ripe to be shorted on current levels. The stock may continue its upwards journey after a brief correction and thus, every short position has to be constantly monitored as institutional buying in this liquid stock can cut short the correction.