Breaking News Sends Biotech Stock Up 60%

What's up everyone? All right, so in today's episode, I'm going to break down my trades from the morning. Today, we had a biotech stock that squeezed up on breaking news and the headline read pretty well. It seems like a compelling headline that they put out. And so I'm a little surprised that the stock isn't holding up better. In fact, I thought with news like this that this was going to be one of those stocks that went up 200, 300%. I stepped up to the plate. I thought we were going to have a huge move. And I'm a little bit disappointed. I'm a little bit surprised. This speaks to the challenge of being a trader. That you could have two companies both that have what sound like great headlines. One goes up 300%, the other is kind of a dud. And you're like, I don't get it. Why didn't this work out better? Now, there's a number of variables that are a little bit beneath the surface that can help explain it. Um at the end of the day, we don't always know exactly which variable was the reason why this didn't make a bigger move. We might be able to find out a little bit later, weeks or maybe months from now, if we get additional filings from the company and we get more insight into their financial condition. But as of right now, we have a stock that put in a big move and is now giving back those gains. A little disappointing. But nonetheless, we're going to go over it here in today's recap. So, the ticker is ERNA. It's currently up as of right now only 18%. Let me read the headline to you. Uh so, this is the therapeutics company. The headline is uh is right here. So, unveils uh breakthrough preclinical results, achieves 100% survival and tumor elimination in ovarian cancer models. So, you know, I read a headline like that and and I'm I'm generally I read that on a biotech stock and I am bullish on it. Uh especially in the context of the stock is actively surging higher, going from four to five up to six. And so, I didn't take my first entry on this until about $6. That's where I jumped in. And I'll show you on the 10-second chart how I took this trade. So, the stock pops up right here. We get this first um little squeeze, uh which was up to about uh 581. It dips down, then back up here to 591. As it dips down right here, because the stock had already hit my scanner, I was I was reading um I was looking at the headline. I was looking at the chart. And I was watching on this little dip off of five. And I thought about getting in right here at about 530. It seemed like at 538, there was some buying, and it seemed like there was a degree of support. And I almost punched it. But I hesitated. I said, "Well, let's just wait a second." So, why did I hesitate? Well, one of the issues with this stock um already was that we did have this topping tail up here. So, we had popped up to this high of 591, and we'd had this topping tail here, and then we dipped back down. And we had also had a stock a little bit earlier this morning that had done a round trip, where it popped up and then actually reversed and went red on the day. It was APVO. So, APVO puts out news, which again reads pretty nicely, and it pops up and is now down 15% on the day. So, because we had, you know, just had this, I was a little more cautious on ERNA initially. So, I don't punch it initially. I kind of wait a second. And then it starts squeezing up, and I'm like, "All right, man. If I don't jump in here, I'm going to miss the move." And so, I jumped in right here for the break of six. And in this candle, right here, it goes from $6 all the way up to a high of 722. And I'm adding into the squeeze. I'm thinking, "Here we go. This thing's going to 7, 758. This is exactly what we've been looking for." Unfortunately, as you can see, it dropped back down. And so, I added into the breakout, and then I had to unwind the trade as quickly as I could in order to keep profit. I was adding too high. So, it comes back down, it drops back down, comes all the way back down to five. Bounces, comes back up to 620. All right. Moment of truth, it comes back down again, and then right here comes all the way back up to a high on this candle of 651, and that ended up being sort of our little high-water mark. At that spot right there, I thought maybe we were going to curl back through the high of day. That's what I was looking for. That point of no return where we were going to retest high of day, and we just couldn't do it. So, I was able to get out of the rest of my shares um up in this area here. I had bought I had added uh down here on this pullback off of ascending support. We got this curl back up. But, unfortunately, we weren't able to retest the high of day. And then when we dropped down, and we broke this blue ascending support line, I was like, yep, it's no good. It's over. And I was I was sad to see it uh fail. So, then it just ends up going sideways here for the rest of uh premarket, more or less. And what's interesting is you've got a stock just going sideways. It was so thickly traded. All of a sudden, you've got a ton of buyers, you've got a ton of sellers, and this thing's not moving at all. So, we go from very thinly traded making a big move to all of a sudden very thickly traded and compressed into this relatively narrow range, relatively narrow. I mean, the high here was, you know, 625, and the sort of the low of the range was, you know, down here around. So, it's like a 75-cent range, but still a fairly tight range. And then at the opening bell, it pops up, it squeezes up to 625. It can't break through that level, and it flushes back down. Goes sideways, steps down again, halts down. And now it's just unwinding. Now, on the daily chart, when I first pulled this one up, I saw that it had a lot of room to the 200 moving average, which is way up here at $44, and that it was a somewhat recent reverse split. So, in the stock was sort of it's been selling off, but it's been kind of flat here just for the last little bit. And so, I thought this could be a nice turnaround story. It's not a stock that has like a dozen reverse splits back-to-back-to-back and has been just, you know, really tanking. It's down, certainly, but it felt like this could be a good spot for a turnaround story. And unfortunately, um you know, we just didn't really get it. So, so anyway, so this is the headline here. Um now, you know, one of the challenges obviously with with trading is it's hard to be an expert at everything. I mean, we trade AI stocks, we trade crypto stocks. I mean, not cryptocurrencies, but stocks with crypto headlines. Um you know, we trade um we trade stocks during the pandemic that had to do with, you know, different treatments and all these different things. And we don't know everything about all these things, right? I I I can't understand all of the language in this because this is not my area of expertise. I'm not a uh you know, scientist or you know, I guess the type of person that would understand all of this stuff, a doctor. Uh But what I can understand is price action. And so, when I see a headline and I read that the basically the summary of it and I see at the same time the stock is surging higher, then I draw the conclusion that it's obviously because of this news headline that's just come out and that the market is responding favorably. Uh if at a certain point suddenly the stock chart starts telling a different story that's inconsistent with the headline, then I have to choose which do I stick with? Do I hold strong and say no, this headline is good. I'm I'm to hold the the stock. Or do I say the headline just seems good, but the price action is telling me to get out. And so at a certain point, I've got to cut the cut the trade, and I got to get out. And if that means reducing the expectation that this was going to be a big win to maybe just a small win, or maybe from a big win to this is a loss, or from a small loss to you know, whatever it is, I have to be able to adjust my expectation. Uh because if I get stubborn and I dig my heels in, that's when that's when things can get really bad. So, you know, I think that ERNA is um it's just going to be an interesting example of a biotech stock that had breaking news. It seems like a good headline, but for reasons that we don't fully understand, the stock's not holding up. Now, we could look at the filings on it. Bam SEC um ERNA. And if we look at the filings on the 10-K, which you could do for for any company. Um of course, uh you know, we could go down and we could look at the financials. One of the challenges with this is getting into over-analyzing. And again, you over-analyze, and then you're creating a thesis or or or a bias of why you think this should keep holding up even though the chart is telling you the opposite. Um this might give us a narrative or help us create a narrative of why it's not holding up better. Um you know, we could look at this and say, "Well, you know, they've got they've got no revenue. Okay, they've just got expenses. Okay, that's not uncommon with biotech companies, especially in the R&D phase. They're spending a lot of money on research and development. They sell shares on the open market to raise more money to continue financing this R&D, and they hope that eventually they come out with a headline like this, and the company has an asset that is now potentially to big pharmaceutical companies worth hundreds of millions of dollars. Who knows? Maybe more. And overnight the value of the company could, you know, 100 X. I mean, that's that's the sort of the trade. Um so, is it uncommon to see uh a company that doesn't have revenue or a company that has a shelf registration? No, neither of those are uncommon. If you said I'm not going to trade any small cap stock that has a shelf registration or any small cap stock that doesn't have, you know, positive earnings, you would be eliminating a lot of these highly speculative, highly volatile trades. And while some of them don't work uh as well as others, you wouldn't In my opinion, you wouldn't want to eliminate all of them because you would just you would lose too much opportunity. So, this is where we kind of have that fine line of um you know, making a decision in the moment of do I take the trade? Do I not take the trade? How much research do I do before executing the trade? Right? I don't have time to pull up the filings. I don't have time to check the registrations. And even if I did, would it change my decision-making? If the stock is squeezing up, at that moment I'm jumping in. If it stops going higher and it starts showing this period of sideways consolidation, that's when I pulled up the filings and I said, well, do they have a shelf? And I saw they did and I thought, okay, well, could that be it? It could be. Um you know, does the company have warrants that they've sold? You know, yes. What's the strike price? Well, they're pretty high because the company's done so many reverse splits, so it's probably not uh institutional investors exercising warrants, you know, so it's like you you sort of try to put the pieces together, um but ultimately all of that is still speculation and the answer's right in front of us, which is that the price is going sideways and this doesn't warrant taking any more trades. I was hoping that we would get a curl back to the high of day, right? If we look back at some of the other moves we've had in recent you know, the the last couple weeks, this stock bird you know, this initial pop and then a curl back to the high. I had to switch to a different time frame to pull it up, but but in any case, we've definitely had some nice moves in the last couple weeks, but it's been a bit hot and cold where one day, you know, we got a 2-300% move like what we had on Tuesday. Was it Tuesday? No, Monday? Monday. And then the next day is dead. So, Monday was a $46,000 green day and then Tuesday was dead. Today decent, but the one that I traded isn't really still moving a lot higher. What's tomorrow going to be? Is tomorrow going to be another cold day where, you know, we maybe get one move that lasts for a few minutes and then that's it? Or is or is tomorrow going to be hot? And this is sort of that lukewarm market. Traders are looking for opportunity. They're looking for things that are moving, but the second these stocks start getting heavy and you know, they're just going sideways, people give up on them. So, traders can be very fickle in that regard. You know, they're all in and then they're all out. It's like, I'm off of this one. I'm going to something else. If we look at volume in the market today, you could see that you know, we do have a couple lower price stocks that have some volume. AHMA 61 million shares. I wasn't interested in it. It's too cheap. I know I don't typically make good money on these, so I said no to that one. GCTK too cheap as well. SMCI, well, this is a you know, this is a higher float stock, higher price. AMD. I mean, yes, I understand these are in play right now, but um you know, and the S&P 500 is obviously up quite a bit. So, you've got maybe a little dispersed attention on a day like today. Maybe you've got traders that are saying, "Ah, I'm not going to trade small caps. Maybe today I'm going to trade some large caps or I'm going to trade, you know, AMD or I'm going to trade options on something." And I don't know how often traders just make that big of a leap from trading a small cap stock to going and trading options on a large cap, but um but today there were opportunities in other areas of the market, so that may have been a bit of a um you know, distraction or kind of drawn attention outside of where I typically would do the best. I think the fact is, looking at the leading gainer, you can tell that the leader is a higher float stock. It's not something I would typically trade. Um second leader, I mean, it's today's just not a day where I I'm probably going to have, you know, a home run. Um because what is obvious doesn't fit well within what I typically make good money on. So, in spite of all of that, as you can see, I do have some some profit here. This is in my Roth IRA, so uh in the retirement account, chipping away. Green is good. I'm grateful for that. Had a good day on Monday, a red day on Tuesday, a good day today. So, building that cushion for the month of May, and you know, let's see what the rest of the week holds for us. It's going to be a little touch-and-go, but each morning I'm sitting down and I'm asking myself, you know, I just need I'm telling myself I just need to find one good trade. And if I see one good setup, a stock that meets all five pillars of stock selection, I'm going to step up. I'm going to be aggressive. I thought ERNA had more potential in it today. I'm a little discouraged that it didn't do more. I was positioned well for a really nice move, and it kind of flopped, but you know, I got to keep stepping up to the plate, and the last couple weeks have shown me that if I step up to the plate and I swing hard, some of these are going to connect in a big way and I'm going to I'm going to pick up some nice trades. So, I got to stick with, you know, stick with that even though today I feel a little discouraged that this one didn't make a bigger move and and part of that's also because, you know, yesterday on CLRB, um, I you know, was a red day. So, that's sort of two days in a row where I had a idea of what I thought was going to happen and it didn't really play out. Uh, of course yesterday was a, you know, a little bit different. This one really completely failed. ERNA today did give a little bit more, but, um, yeah, it's a it's kind of a we're in a little bit of a interesting spot here. Um, AI headlines had worked well in the last couple weeks. So, maybe we could get back on an an AI headline. One of the challenges, I'll say, with biotech companies it is the inherent risk of offerings. That these are companies that typically don't have cash flow, they don't make money, and they spend a lot of money on research and development. It costs a lot of money to develop these drugs, and so these companies usually do secondary offerings. They usually do have reverse splits. Um, they have shelf registrations and yes, you can get, you know, two, three, 400% squeezes off the lows. Um, that is true and we've we've we've definitely have had enough of them that they're worth trading, but, um, you've also got to be careful not to get stubborn when they're not working because, you know, that we've seen enough examples where they do end up giving back all of the gains. And of course, when that does happen, it's, um, you know, it's disappointing to see and you kind of figure, all right, well, here we go. It's, um, I they I don't know. It's it's like the the company kind of wins a little bit at the expense of shareholders, you know, and I know we're not I'm not a shareholder exactly as a more of a trader, but it still feels like the company kind of wins by selling shares, you know, as we're actively trading it. You know, we're trading thinking, all right, this thing has a potential to make a big move and then is the company just selling shares right into that move? And that's kind of unfortunate when that's the case. I don't know if it will be with this one. We don't know yet. CNSP though, going back to Monday, this was the one that we got that nice really nice move on from $2 all the way up to, you know, 10. And this one's still hanging out at like $8. So, has it given back a little bit? Yeah, a little bit, but, you know, it's still holding up more than 50% of the gain. So, that's good to see. That's good staying power. Now, this company, will we get more opportunity on it in the coming days and weeks? It would be continuation if we did. It could happen. First daily candle to make a new high, that type of thing. You'd typically be better off if it comes out with a fresh headline. If it did a private placement, you know, which that was the headline on Monday, but if it did another private placement, more share more investors coming to the plate to give them more money at a good price for existing shareholders, something like that could be bullish and we could get another move higher, but ultimately, it would need to break through the high. And one of the things that does happen from time to time with these stocks is that you have the initial high volume day, which was 83 million shares on this particular day, and then it sells off for a couple days. Today, it's only got 250,000 shares of volume. So, people have totally given up on this stock, forgotten about it. And so, if all of a sudden it does pop back up to 10 or even goes to 12 or 14, often it would be on relatively light volume compared to the initial move. So, you know, if right now some buyers came in, some news came out, and it spikes up to 12 on a million shares, that would still be way less volume than the previous day. So, sometimes these will end up having this divergence where they end up moving higher, but on lighter volume. And unfortunately, although that is a continuation setup, those can be difficult to trade as well because they don't have as much They're not They're not as liquid. So, it's not as easy to get in and out. So, you know, at this point, uh biotech does seem to be the theme this week, but it's, you know, just something to be a little careful with. Um are these going to have staying power? We haven't had one so far this week that kept like really cranking higher um all day long. And I think we need that in a way to maybe scare short sellers off a little bit. Um and also to give long bias traders the confidence that this might go higher. Right now, it's like, is this only going to go up for 5 minutes and then that's it? Uh you know, is this going to really continue going moving higher? And and it's right now it's a little hard to say. So, if we switch off of biotech and we go back to an AI catalyst or something like that, that might be just as well, but um but ultimately, you know, as a trader, we're just we're trading what's in front of us and what's volatile. So, biotech is, you know, been tried and true for years and decades, you know? It's it's Think back to uh um the Meet the Parents movie with um uh Owen Wilson I and his character who was talking to Greg uh and he's like, you know, "Oh, yeah, you know about getting into those biotech IPOs or whatever? They just explode." You know, cuz Greg's in the medical space. Um so, you know, that was in like 2003. Biotech has been around forever. I mean, this is nothing new. It's It is a uh kind of tried and true uh sector of the market for volatility. But, you know, it it takes There's risk and reward there. So, anyways, um yeah, we'll see what we get tomorrow. I'm going to be uh streaming as always at 7:00 a.m. So, those of you guys uh who haven't already checked out a 2-week trial, I'll put the link in the description. It'll be also pinned at the top comments, so you can check out a 2-week trial, watch over my shoulder as I'm trading, and hopefully we do get some nice opportunities here to finish off the week, Thursday and Friday. That would be great. So, I'll see you guys bright and early tomorrow morning. And reminder as always, trading is risky. My results aren't typical. So, manage your risk, take it slow, and always practice in a simulator before putting real money on the line.