At prices slightly above the IPO price, this stock is sit up for VIOLENT SWING ON THE UPSIDE; perhaps a repeat of several months ago when it catapulted by nearly 150 percent in a matter of days. Here is why I think the same is highly likely to happen, and am adding to my position:
(1) Fundamentals: a. The most important news since it went public, the results of the clinical data on its key drug is slated to be announced in May. b. Cash Rich, almost 6 dollars per share and no need to raise cash for the next two - three years; b.(3) Technically, the selling has been truly exhausted, risk reward favors the long side: sometimes bid -ask spread of .10 - .15 cents; going up 3-5 percent or down by the same percentage based on 5 K last trade. The stock has bottomed. When the big news is announced, given the lack of liquidity on the downside plus huge beta, this is one of those stocks that could double or triple intra day or two days. Sure, it will give up some, still it could be one of those biotech trading lottery ticket.
(4) Management owns a ton and refuse to sell, even with the lock up long expired. Why not? what do they know that I don't know.
The stock found a bottom today April 28 as it violently recovered on the upside from intra day low. I have been critical of this management but now that PPS is down 42 percent in the last few trading days on modestly positive news, it has discounted the kitchen sink and than some. Therefore, short and intermediate term the risk reward is very heavily favor the long side.
What rattled the stock was the inept release of two PRs on two consecutive days, creating impression of flimsy management; that and the fact that some investors got the impression of more robust news regarding the key drug. But, this is behind us and ahead is the expected release of positive news, already hinted by the management in the latest news conference.
Oops. My mistake; 18 million shares outstanding. Regardless, I think at 12 dollars it is a very good trading opportunity. It has gone down from 19 to 12 on news that is trending positive, albeit not very significant. Thus, all is in the stock price and PPS is poised for significant uptick, if only the management can put show some gumption.
Critical of the management, still I purchased at 12. 50 and added to my position at 11.30 because:
(1) $ 20 dollars per share cash, as of March 30 2015, and the stock is selling at 11.30; thus SAFE for the next two quarters at the current cash burn rate;
(2) Only 4.625 K share outstanding. Thus, a hint of a good news and the stock flies off the chart;
(3) HONESTY: I have negative view of the management ( see my posts), but the news trendline, albeit insignificant, still is positive.
(4) The ABSOLUTE worst is already in the stock price as it cratered from 19 to 11
(5) In short, the PPS is slightly above 11 and the company has net net cash of 20 plus in the till. Thus, a slight hint of good news the PPS fly. Since, it is an extremely high beta stock with only 4.625 shares. It could fly to extreme heights in the other direction. Witness that today it is down 10 percent on average volume. The opposite is also true.
(6) One would have to be really crazy to short this stock.
Just plain raw cash in the till minus total liabilities equals 98 dollars. Adjusting for cash burn rate through March 2015 of roughly 5.5 million, the total cash in the till is roughly 20 dollars per share for a stock now selling at 12. 50 and a company with only 4.625 K shares.
With this gigantic cash in the till, and so few shares outstanding, the Management can and will deliver minimus, and the PPS will fly. In short, with this kind of gigantic cash in the reserve and less than 5 million shares, with a hint of good news this is DOUBLE. Thus I bought in spite of my initial modicum of reservations about management.
(1) Successful TURNAROUND SITUATION-it has turned the corner. While revenue came slightly short, earnings, operating margins, operating cash flow, operating cash flow per share all came pretty strong,
(2) RISK -REWARD FAVORS BUY- Technically, the stock has pretty much bottomed;
(3) Reasonable valuation
My point exactly. It is sharp elevator correction of 5 , 10, 15 percent that can spike UVXY. In contrast, bear market are elangatte slow moving market declines. In bear market contango does not appear. That is why, hope for the sharp elevator market correction, instead of the 8 percent, 12 - 15 will give you 70 - 100 percent. Sell, knowing that as soon the market turns, contango sit in UVXY will begin its march toward ZERO all over again.
Bear market slow decline will not help you as the daily roll and contango persists in slowly eroding long term bear market. On the other hand a very steep and sharp correction lasting just a month or two of 10 to 15 percent can give you 50, 75 percent or even a double. And thereafter the horror of UVXY hurling toward zero starts all over again.
Believe all you want but below is the undeniable iron-clad unquestionable fact why UVXY will continue to deteriorate, occasional upticks notwithstanding.
CONTANGO, DAILY ROLL AND STEEP CURVE: Here are the VX future Settlement Prices
VX 05/20/2015 14.6250
VX 06/17/2015 16.1750
VX 07/22/2015 17.0250
VX 08/19/2015 17.4750
VX 09/16/2015 18.0250
VX 10/21/2015 18.4750
VX 11/18/2015 18.7250
Imagine if the formula for your shares of UVXY was to be forced to sell tomorrow at 10 but you are also orced to buy with that amount of money that same equity at much higher 14.62 per share.. That is why UVXY has lost 99.50 percent since its inception.
You may get lucky and make good profit on ocassion and only in the short term due to a 5 -10 percent price correction, but do not think that you are right and the 99.5 percent loss in UVXY as fact on the ground is wrong , no more than believing that somebody actually swum upstream the Niagara Fall.
Next month: 14.63; Sell future at today price and buy at a higher 14.63. Daily roll will kill your position, averaging 2 -3 percent loss' and it gets worse. Second month is 16.10 and third month forward the VIX futures settlement price is 16.95.
This could change, at least for the very short term, say the forward month, if and only if there is a really sharp correction in the market, 10 - 15 percent. Barring that, longs are screwed.
That said, I would nibble at 9 for a short uptick of 10 - 15 percent. Why, given the forward month 40 percent upward slope of the curve, the contango. I don't. Just hope that the millionaire who bought put when UVXY was 17 and 9 exercise price knows something I don't.
Long term, will continue its march toward ZERO, punctuated by recurring reverse splits over and over again. Thus, long term even though it has lost 99.5 percent of its value, it is still a good short at any price.
My two cents, I hope this helps both longs and shorts.
Key is Support level: in the face of solid quarterly report it is yet another solid bit that above 6 is the new strong support level. This means, for the next three months your downside is four percent or so, and the trading upside is in the short term is near the top of the channel at 7.38 minimum or 15 percent, investing return could be 50 percent high or more. So you do the math. It ain't going below 6, barring a precipitous nosedive in the stock market. So yes, it is a very good buying opportunity.
100 Shares sell at 6.20. Meaningless. The stock has solid technical support above per-announcement PPS; it will inch up in he days ahead to 7. Short term resistance is at 7.38: 6.20 - 7:38 is the new short term channel- short term very low or none downside trading risk and 15 percent upside reward
Yesterday April 21 the company issued a PR press release that the company will be making presentation regarding 6 pre-clinical. Apparently, it didn't stem the tide of selling; it contributed to it as the Market correctly diagnosed the superficial PR as sign of desperation. Guess what, the management waited one whole day to issue yet another PR press release, announcing that it will make a presentation in May regarding phase 1 clinical. Don't these people have shame? Are they that desperate? They are acting like penny stock purveyors that have a meaningless PR issued to the market once a day or a week, hoping it could juice up the stock. This is exactly, the kind of BS that destroys whatever left over credibility this management still has. After all, this news was available to them 24 hours ago; could have been and should have been released with the PR yesterday. Oh wait, they are desperately trying to stem the tide of selling. They guessed wrong: Mr. Market is on to them, and this PR will be seen as sign of desperation by management. Like yesterday, when the meaningless PR actually put fuel to the fire of selling, expect the same today.
Don't be fooled. This equity dropped like a rock two days in a row; today it closed near its low; thus significant selling overhang remains. For short term trade, 11.75 - 12.25 is a moderate technical support area. Long term, this is simply a company that burns nearly thirty million per quarter cash burn rate, no more than three quarters of cash in the till, will have to dilute to the tilt to raise cash and yet has no future in spite of it all. To make matters worse, the CEO and CFO just give themselves huge BONUS, go figure.
See today, April 21 release. shameful; this company is trying to BS its way out and MR. MARKET has finally caught on. Thus, down over 2 dollars yesterday by smart money in the know yesterday in anticipation of the NEWS today and down again. PR BS finally catches up with these high beta flimsy micro cap biotechs
Implications for UVXY: Contango and Daily Roll for UVXY will persist for the remainder of the year. As I have said twice, may be 9 might be a good entry for a quick 15 percent uptick; only because a smart position bought PUT when it was trading at 17; turned out to be out excellent trade. Long-term you can short UVXY here to your heart desire or buy PUT and make tons of money. It has lost 99 percent. Statistically improbable, nearly impossible to see anything but continued deterioration and UVXY march toward zero punctuated by reverse splits over and over again.
If there was ever a legal challenge to the company that knowingly inflict this UVXY drug-like product who have lose daily, among others, the legal counsel will say, look, "retail investors were well aware of the sheer magnitude of downside risk and repeatedly warned by other retail investors."
Your are mistaken: Greece's debt is now double its GDP; US debt is roughly 95 percent of US GDP; if US had Greek level of indebtedness,, our debt would be 34 - 35 Trillion dollars.
Incidentally, Japan's national debt is hundred percent larger than US or twice its annual GDP.
Germany, arguably the least indebted advanced country in the West and Eurozone has seen its national debt rise to about 78 percent of GDP; or only 17 percent less than US.
This Zerohedge BS had prompted many newbies to expect calamity, losing precious dollars on UVXY since this vehicle was worth tens of thousand of dollars, adjusted for splits.
Instead of this nonsense try to understand: Dail Roll, perpetual Contango and the fact that consequently this product is destined to go to ZERO; if not for reverse split; thus, 99.99 percent loss.
Ten percent PPS appreciation was already in the stock price before the announcement. Therefore, expect the stock to revert to 2 in the next few days, now that traders will dump and there is no news for some time to look forward to.
Strong Jan 2015 left over overhead supply between 4 .25 - 5; thus, sold off its high; selling will continue as those who bought in Jan 2015 above 4. 25 to 9 will sell to take small profit, but mostly to relieve the pain of big holder since Jan 15. Thus, strong overhead resistance. Warned you to sell this morning when it was near 6.