For another week, the trade of the week will be in the biotech sector once again. PDL BioPharma (PDLI) is settling down and seemingly preparing for another move up.  Earlier in July, PDLI announced that a U.S. district court in Nevada ruled in favor of them for the ongoing patent dispute with Roche’s Genentech unit. PDLI saw significant bullish volume on a strong move up upon that news release.

Yahoo Finance has the following profile for PDLI:

PDL BioPharma, Inc. engages in the management of antibody humanization patents and royalty assets, which consist of Queen et al. patents and license agreements with various biotechnology and pharmaceutical companies. Its Queen et al. patents primarily cover humanized antibodies, methods for humanizing antibodies, polynucleotide encoding in humanized antibodies, and methods of producing humanized antibodies. The company was formerly known as Protein Design Labs, Inc. and changed its name to PDL BioPharma, Inc. in 2006. PDL BioPharma, Inc. was founded in 1986 and is headquartered in Incline Village, Nevada.

Fundamentally speaking, Yahoo Finance has the following information for PDLI using 1st quarter 2011 figures. PDLI has a forward P/E of only 4.64 and a PEG ratio of only .21.  $7 is the mean analyst target.  PDLI has total cash of $160 million, with a sizable amount of debt at just under $500 million.  As of June 30th, the short percentage of the float was 12.80%, but I expect that may have decreased due to the high volume on July 11th.  It appears PDLI may be reporting 2nd quarter earnings on July 27th (unconfirmed though), so I will likely be out of the trade before the earnings date as I do not like to hold positions into earnings.

Technically speaking, PDLI is setting up to break new 52-week highs of $6.75 set in August 2010.  The trade is to buy PDLI on a pullback towards the 50-day SMA or buy on a good volume breakout above $6.42.  Tight stops would be placed just under the 50-day SMA or just under $6.16.  Looser stops would be placed under the 100-day SMA or somewhere under $6.  As usual, we would be wary of a strong move up Monday morning. See the chart for more details.

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As always, do your own homework to see if you agree. Good luck out there,
Mike
At the time of publication, Kudrna had no positions in mentioned stock, but may initiate a position within 72 hours.