In a perfect world, stock prices would accurately reflect a company's underlying value. and not be swayed by investor sentiment (good or bad). ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), Celsion Corporation (NASDAQ:CLSN), and Geokinetics Inc. (AMEX:GOK) aren't trading in a perfect world though. These three stocks - for better and worse - are among the market's most watched and traded, meaning excessive opinion impacts their price more than current or future prospects. That's not a bad thing though; savvy traders can use that to their advantage of they can just get a bead on their charts. To that end...
Too hot: I have no doubt that casting doubts about the near-term future of Celsion Corporation isn't going to win me any friends. Most traders love winners, and more than that, most traders love chasing winners. And CLSN is clearly a winner, having gained 78% in less than three weeks. I've seen this move all too often though. These big rallies tend to stop and reverse just as quickly as they materialized, and in this particular case, the stock's about as overbought as can be [the weekly chart is downright scary]. I just don't like it, and if you're lucky enough to have bought it before yesterday, I have to think locking in that profit now is a good idea.
Yes, I know that CLSN is the biotech company developing Thermodox - a nanoparticle drug that can be directed straight towards cancerous cells. Though a prior trial stumbled last year, hopes are high - and so is the euphoria - about the most recent trial of Thermodox as a treatment for liver cancer. Trouble is, the "best of" may already be priced into Celsion Corporation shares, leaving them nowhere to go after a good showing on the R&D front. Post-good-news pullbacks happen more often than you might think.
Too cold: If you're looking for a place to park those CLSN proceeds, take a look at Geokinetics Inc. Though more than a little erratically, this small cap oil and gas technology stock has rocked its way out of a bearish trend and into a bullish one over the course of the last three months. What's most compelling, however, is the way GOK has taken repeated bullish pokes on high volume so many times since September. The finishing touches were put on the recovery effort yesterday, when the stock pushed up and off the 50-day and 100-day moving average lines; we've finally seen a higher high and higher low.
GOK helps oil and gas companies find oil and gas. The company can create 2D and 3D maps of potential oil and gas pockets deep under the ground or under the ocean floor, and explain the most effective way to extract it. Though revenue has waned in 2012, the bears seem to have overshot with their pessimism on Geokinetics. Now, the pendulum is starting to swing the other way.
Too volatile: Last but not least, if you're looking for some serious action, then ACADIA Pharmaceuticals Inc. is your ticket. This biotech stock has been causing a huge stir of late, and is poised to open a mere 160% higher today on the heels of news that its Parkinson's Disease drug - pimavanserin - works pretty well, in that the most recent study did indeed result in fewer psychotic episodes. Yet, it's not a wholly-done deal. This is the same drug that failed to show much efficacy in prior studies of the drug that were aimed at the same ailment. Some experts think ACAD still need to do another Phase 3 trial to confirm the results released earlier this morning.
So what's the play on ACAD here? Though I doubt it's actually going to open the full 180% higher it's trading at in pre-market action (at $6.70), I do think it's going to open hugely higher. Given the whole situation, I don't think there's going to be much room left to run no matter where it opens. On the other hand, euphoria can do funny things, and I wouldn't be surprised if the big breakout attracts a small army of follow-on buyers. So, the play here on ACADIA Pharmaceuticals is to do nothing for now, except wait... wait for the rollover to materialize, and then short it. That could take a few hours, or maybe even a few days. But, once it starts, it's going to be tough to stop. You'll know it when you see it.