There’s a lot of buzz out there in the trading community about Vanda Pharmaceuticals Inc. (VNDA) right now.
I personally tend to stay away from two sectors in my trading; Pharmaceuticals, and anything with the word “bio” in it —too volatile for me. There are earnings, FDA announcements, drug announcements, law suits and many other volatile occurrences that cause random over night moves. My dad actually worked as a pharmaceutical salesman for many years. He worked at Boehringer Ingelheim for 20+ years and just crushed it. He gave me similar advice, years ago, about pharmaceutical investing. “If you do it, do it light and long” he said.
Stock Action
This particular company had a glorious gap on June 4, 2014. Let’s analyze this gap and the power it has. You see, there are approximately 11 bearish candles since May 13. These candles were created by selling pressure. With the gap up on June 4, anyone who shorted the stock there was or will be forced to buy to cover. (That’s how traders exit a short trade). Opening above $11.00 was a big deal for this stock and an excellent location to “trap” any of the short sellers.
This gap should remain open for quite some time, weeks to months likely. Some could argue VNDA is forming a mini inverted head and shoulders pattern as well, with $11.00 being the neck line. A close above $12.82 would cement the deal but any pull back is buyable with a stop being placed in the gap, around $10.88 or the lowest, $9.30.
Bottom Line
This gap would also be a great location for a put sale, with June or July expiration. Currently the $11, $10 and $9 strikes have decent premium, even for June expiration. As of June 4, I would have a bullish perspective on VNDA. If you have any questions, please feel free to reach out and let me know!
