ALKS: Good Mid to Long Term Bet....but Near Term Yellow Caution Sign
Yellow caution sign. Fact, ALKS stock, on low non-confirming volume, today broke a downtrend begun on February 1 declining from $ 23.36 at the end of January to a low of $ 19.77 February 26. Stock technical’s are pointing to continued stress. MACD is negative and weakening, the 5 day EMA has been below the 13 day EMA since the beginning of the month, and the stock is lower than the 20 and 50 day SMA. This was anticipated by a downgrade from security analyst at MKM late January.
Bio-Pharma stocks are driven up and down by catalysts; clinical results and financial performance. ALKS competitor, Asuka Pharmaceutical Co, is expected to receive approval this week for a monthly injectable form of Abilify, giving them a three quarter time to market lead over the ALKS alternative. This could have a very near term, material and negative impact on ALKS share price.
Lastly, many expect the market to pullback by 5-10% sometime between now and the replay of the Washington DC thriller horror movie " Sequestration " at the beginning of March. A low beta stock could expect to experience a ratable retrenchment, higher beta issues, like ALKS, have exaggerated movements up in good times and down during pullbacks. Put in context, during the last confrontation over the sequester in November, ALKS dropped from $ 20.69 November 6 to $ 18.60 November 16, not sustainable surpassing $ 20.69 until January 7.
Conclusion, ALKS is a quality company, with attractive medium and long term prospects, however at current price levels the 30-45 day risk/return is disproportionately negative. A price pullback, precipitated by a normal market correction, sequester inspired retrenchment, or any combination of the two suggests price range closer to $ 18.60- $ 18.70, offers a better return with lower risk.
Fact or precedent based commentary or alternative perspectives encouraged