Big fish story

02/19/20
  • AMRN rallied more than 85% late last year
  • Company received FDA approval for fish-oil heart drug
  • Shares off more than 30% from December high, near support

It’s always good to pay attention to fish that are swimming against the current. Sometimes it’s just a case of confused fish, but sometimes it can mean the current has anglers facing the wrong direction.

Yesterday, for example, small-cap biotech Amarin (AMRN) was swimming upstream, up more than 3% by mid-afternoon despite the bearish broad-market current that had all major US indexes solidly in the red:

Chart 1: Amarin (AMRN), 10/9/19–2/18/20. Amarin (AMRN) price chart. Two-month correction.

Source: Power E*TRADE


One possible explanation for AMRN’s against-the-grain trading was an upgrade from Citi, which argued that it was an “attractive time to buy” the stock1—that attractiveness presumably tied to a 30%-plus sell-off from its December 16  high of $26.12. Citi slapped a $24 price target on AMRN shares, roughly 34% above yesterday’s levels.

Possibly worth noting: In mid-November, Citi downgraded AMRN when it popped above $242—either (depending on your perspective) missing the stock’s push above $26 a month later, or (more fairly) catching the stock when it was pretty close to an important high.

A little background: Amarin has just one product, Vascepa, which is a fish-oil-derived drug designed to reduce the risk of cardiovascular events in people with high triglyceride levels. AMRN’s late-2019 surge (+87%) came amid an FDA decision to allow Amarin to expand its marketing for the drug to include patients who are already taking statins (Lipitor, etc.)—a move that some analysts estimated could double the drug’s potential market.3

Was that runup overdone? Well, perhaps—but the relevant question now is whether the pullback has, as Citi said, made AMRN “attractive.”

There are different ways to define attractive. Take a look at the following chart, which, among other things, shows AMRN’s 700%-plus rally in September–November 2018, when the company initially announced successful trial results for Vascepa:

Chart 2: Amarin (AMRN), 8/6/18–2/18/20. Amarin (AMRN) price chart. Pulled back to support.

Source: Power E*TRADE


Since then shares have traded in a wide, jagged range. But technicians who have been watching the stock may have noticed the recent pullback dropped prices to a conspicuous support level—the September swing high, which was also its November breakout level.

AMRN has tested that level over the past several days, and the fact that it has remained above it is something traders may find attractive, with the understanding that market tests are generally of the pass-fail variety: If the test level doesn’t hold, maybe the stock won’t make the grade after all.

But in trading, it’s always good to know the line separating success from failure.

Market Mover Update: Gold closed above $1,600/ounce for the first time since March 2013. April gold futures (GCJ0) posted their second-biggest up day of the year, rallying more than 1% and trading as high as $1,608.20.

Chipotle (CMG) has rallied more than 4% since busting out of its trading range last week. Qorvo (QRVO), which derives a huge chunk of its business from Apple (AAPL), fell more than 3% intraday yesterday on Apple’s warning it wouldn’t hit its quarterly revenue estimate because of the coronavirus.

Today’s numbers (all times ET): Producer Price Index, PPI (8:30 a.m.), Housing Starts (8:30 a.m.), E-Commerce Retail Sales (10 a.m.), FOMC Minutes (2 p.m.).

Today’s earnings include: Analog Devices (ADI), Hyatt Hotels (H), Mosaic (MOS).

 

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1 Nasdaq.com. Buy Amarin Because It Is Cheap, Analyst Says. 2/18/20.

2 Barron’s. Amarin Stock Has Soared. Why Citi Thinks It's Gone Far Enough. 11/18/19.

3 MarketWatch. Amarin’s fish-oil pill is now available to millions more patients, but it’s still no Lipitor. 12/21/19.

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