There’s a whole community of traders and investors that love the biotechs. Much like any other industry, individuals attach themselves to particular plays and remain extremely devoted to the day-to-day activities, but with biotechs, the loyalty may be spread a bit wider to the industry in general rather than just one particular company. Biotechs can be one of the most lucrative plays in the market and they attract speculative and fundamental traders like no other.
Toronto-based Transition Therapeutics Inc. (TSX:TTH) is a biopharmaceutical company that develops novel therapeutics for various disease indications primarily in Canada. Its lead products include ELND-005/AZD-103, a Phase II clinical trial product for the treatment of Alzheimer's disease; and TT-223 gastrin analogue, a Phase II clinical trial product for the treatment of diabetes.
While these are the Company’s flagship compounds, it also has several other pre-clinical compounds in its pipeline. Additionally, Transition has a strategic collaboration with Elan Pharma International Ltd. to develop and commercialize ELND-005/AZD 103 therapeutic agent and agreements with industry giant Eli Lilly to develop and commercialize its TT-223 and other gastrin-based therapies.
While a solid company breeds loyal investors, a solid technical chart brings in a whole different critical element. In the case of TTH, the company has a very small number of outstanding shares, a tight float of only 15.63 million shares and a market cap of under $50 million. Even for a developmental biotech, given the developments of the Company, the market cap is relatively low.
Trading currently in the area of $2, the chart is well off its 52-week highs of $4.75 and technically appears ready to find a bottom. The tight float also explains why TTH trades with a low volume, but also creates awareness as savvy technical traders know how easily a stock like this can climb very rapidly.
A base has been formed in this area after the price per share bounced off $1.82 and quickly moved back to $2. The short term moving averages, including the important 20dma (middle bollinger band) have now all been passed by the PPS and should lend some support. Two dollars is the first minor price resistance, but appears that it will not be difficult to pass and with a touch of $2.10, the parabolic SAR will flip back to the bottom side; lending more technical support to a bottom at $1.82.
The next price resistance will not come into play until a 10 percent move happens with a climb to $2.20, which will be approaching the 50 day moving average which is trending downward and in the area of $2.30.
A reliable aspect of a technical reversal can be found in long-term indicators including the MACD, PPO and TRIX. All three have exhibited bullish crosses and are trending back towards zero currently. The positive divergence of the MACD (PPS trending down while MACD is trending up) is one of the most widely used patterns in the search to find stocks preparing to make a larger move amongst technical traders.
This is currently happening and alerts are in effect for the MACD to continue to approach zero, commonly referred to as "the money line," as a break of it often leads to price per share upward movement.
Volume-based indicators such as the Money Flow Index, Accumulation/Distribution and Chaikin Money Flow are also reversing course, further strengthening the concept of a possible reversal. Commonly used momentum indicators, including the Relative Strength Index and the Full Stochastics are also turning and heading into bullish territory by breaking through middle zones.
Combining the fundamentals of Transition Therapeutics Inc. with the technical aspects and the depressed market price may lead to this stock hitting the radar of both fundamental and technical traders in the near future.
As always, this is merely AllPennyStocks.com’s interpretation of the TTH chart and business and we strongly encourage all investors to conduct their own proper due diligence and consult with a financial advisor before making any investment decisions.
