On Tuesday, we sent out an alert to short Zogenix, Inc. (ZGNX) at around $40. The trade has been a marginal win so far with the stock trading around the $39 mark. But we think it is on a verge of a drop in the 10% range to $35. The company announced a public offering of 6.7 million shares at the price of $37.50. If you look at the chart and recent news, it very strongly resembles Insmed Incorporated (INSM) which had a similar spike and an offering last month.
INSM announced a public offering of 14 million shares priced at $28.50 on September 6, which closed on September 11. Have a look at the price history around that time:
Just like ZGNX, INSM had a temporary spike above the $28.50 offering price. As soon as it closed on September 11, the participants dumped their shares and it tanked 11% in two days. ZGNX's offering is expected to close today, so we believe that there is a good chance that it will tank in a similar fashion to the $35 range over the next few days.
There are many examples of biotechs dropping after a secondary, but rarely do you ever get such a perfect twin example just a month prior:
So ZGNX longs can choose to have their heads in the sand if they wish. INSM is trading over $30 again so it did recover from the mid-September tank after the offering was closed. The same could happen to ZGNX, eventually. But in the short term this is an obvious short for the rest of the week as Wall Street plays its usual games.
Applied Optoelectronics (AAOI) has had a bad week and it has dropped under $59. Our article on July 5th called "Unlocking The Secret To Trading AAOI: Buy Before The Friday Short Covering" outlined a pattern that we saw in AAOI where if you bought the morning dip on Thursday, we thought there is a very good chance you will make profits on call options or stock by Friday. That week was a particularly lucrative week as AAOI rose from a close of $60.62 on Wednesday, July 5th to $67.30 on Friday, July 7th. We think a similar pattern is forming for this week and AAOI will close above $60 by Friday.
If you like our picks make sure to follow our blog by clicking the follow button on the top of the left hand panel. We are up to 302 followers despite not giving out a lot of alerts, a fact that we think is indicative of a diligent and prudent stock picking history. If you would like to share this blog, make sure to use the URL "nasdaqnewsreports.blogspot.mx" as certain spam filters on social media don't let you post blogspot.com addresses.
Disclosure: We are short ZGNX, long AAOI
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INSM announced a public offering of 14 million shares priced at $28.50 on September 6, which closed on September 11. Have a look at the price history around that time:
Just like ZGNX, INSM had a temporary spike above the $28.50 offering price. As soon as it closed on September 11, the participants dumped their shares and it tanked 11% in two days. ZGNX's offering is expected to close today, so we believe that there is a good chance that it will tank in a similar fashion to the $35 range over the next few days.
There are many examples of biotechs dropping after a secondary, but rarely do you ever get such a perfect twin example just a month prior:
- Both INSM and ZGNX moved in excess of 100% on day one of their positive late-stage trial results
- Both had approximately 25% dilution in a secondary announced a day or two after the big move
- Both offerings were led Leerink Partners, and not surprisingly, are accompanied by price upgrades a day after the offering is announced
- Both have had short term spikes immediately following the offering.
So ZGNX longs can choose to have their heads in the sand if they wish. INSM is trading over $30 again so it did recover from the mid-September tank after the offering was closed. The same could happen to ZGNX, eventually. But in the short term this is an obvious short for the rest of the week as Wall Street plays its usual games.
Applied Optoelectronics (AAOI) has had a bad week and it has dropped under $59. Our article on July 5th called "Unlocking The Secret To Trading AAOI: Buy Before The Friday Short Covering" outlined a pattern that we saw in AAOI where if you bought the morning dip on Thursday, we thought there is a very good chance you will make profits on call options or stock by Friday. That week was a particularly lucrative week as AAOI rose from a close of $60.62 on Wednesday, July 5th to $67.30 on Friday, July 7th. We think a similar pattern is forming for this week and AAOI will close above $60 by Friday.
If you like our picks make sure to follow our blog by clicking the follow button on the top of the left hand panel. We are up to 302 followers despite not giving out a lot of alerts, a fact that we think is indicative of a diligent and prudent stock picking history. If you would like to share this blog, make sure to use the URL "nasdaqnewsreports.blogspot.mx" as certain spam filters on social media don't let you post blogspot.com addresses.
Disclosure: We are short ZGNX, long AAOI
If you're interested in making money investing or trading the stock market, here are some good resources to assist you. This includes technical analysis, investing in the weed sector, dividend stock investing, gold and commodities, sector rotation, options trading and microcap trading strategies.
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