If all you're looking at is the recent headlines, then Raptor Pharmaceutical Corp. (NASDAQ:RPTP) doesn't look like anything all that special. Yes, there's a compelling drug in the pipeline - cysteine, for nephropathic cystinosis (a genetic disorder that can cause developmental problems). Thing is, RPTP isn't going to hear a final yay or nay from the FDA on cysteine until the end of April. Until then, there's not a lot for would-be investors to clamp onto.
Yet, when you take a step back and look at a longer-term chart of RPTP, it becomes pretty clear that something is cooking with the company.
The nearby weekly chart of Raptor Pharmaceutical tells the tale. Though the latter half of 2012 was a volatile one, all that up and down action shook off the weak hands (short as well as long), allowing the stock to enter the new year free of unmerited pressures, and trade based on its merits. Although we're still seeing some volatility, we're also seeing some direction, or undertow. And, it's a bullish undertow.
For starters, we've seen a higher low (in February) following a higher high (in December). We're also close to seeing another higher high. If RPTP can just move above the December peak of $6.28, that will be a new high, and will also underscore the bigger trend of higher highs and higher lows.
Or, if you want to see simpler evidence of a budding bullish trend, notice how both MACD lines are now pointed upward, and have recently made a bullish cross of one another. Yet, there's still room for Raptor shares to keep rising before they retest the last major peak of $7.90, hit in February of last year. In other words, this is a decent trade right now.
But what about the upcoming drug approval date? Shouldn't smart traders wait for that decision before diving in? Sure.... if they want to miss out on the bulk of the gain RPTP is going to dole out.
The fact of the matter is, most of the stock speculation and accompanying movement surrounding a particular drug happens before any actual approval. Traders jockey for a position in front of the event, expecting a pop once the news comes out. The irony is, by the time the FDA unveils any final decision, most of the would-be buyers are already in a trade, leaving few buyers behind to bid it up if and when the Food and Drug Administration says what the market wants to hear. In fact, there's often a bit of a weakness following an approval, as all those early speculators who bought in start to take profits, thinking the situation can't get any more bullish than the day of an approval. It's unlikely Raptor Pharmaceutical will be an exception to that norm.
Bottom line? If you're looking to speculate on cysteine, then the time to do it is now. If you're only a short-term trader, the time to get out is on or just before April 30th, which is the drug's PDUFA date. If you're a true long-term believer in the company because of the drug's potential, then you can buy anytime, but know that you'll have to commit to a multi-month holding period, as the odds strongly suggest RPTP will see a pullback in the shadow of any approval. Anyone who'd thinking of a timeframe in-between is probably going to be disappointed.
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