VSTM | Verastem entering acceleration phase

VSTM Analysis

Biotech is an obvious area of high risk and we rarely get involved unless via limited risk option plays. Only on very low dollar value stocks do we consider outright purchases and we assume that the price can go to zero when assessing our risk. We also do a little research regarding what Phase they are in. Our favored position is to target stocks have have completed Phase 2 testing. Phase 1 often causes a short explosive trend that is short lived. A failure at Phase 2 will have catastrophic consequences for the share price. A successful Phase 2 increases the odds that they may be onto something and this trend can be both strong and of greater length. VSTM is currently in that sweet spot of a Phase 3 trial.

We scan thousands of stocks everyday using our proprietary code and look for the best opportunities. Less is more and we are only interested in very specific set-ups so that our customers  do not  end up with position overload. In stocks there are currently only 4 positions. PowwerPlay is one of our core pieces of code in identifying unusual price behaviour. To place it in context yesterday saw just 4 stocks post the raw signal out of 7000 stocks.

VSTM PowwerPlay

PowwerPlay tells me to go and investigate further.  A glance at the chart shows that there have been 4 PowwerPlay signals, but only the third met the correct criteria.

 

image of VSTM trading Chart with powwerplay

There are two thing main criteria that need to be met. The first uses the Peak Expansion study. This references daily (red, pink) weekly (black) and monthly (blue) support and resistance by properly quantifying which swing points or fractals are important. Every time our threshold for this is met the lines will change in value.  We use a daily chart as our base from which to observe.

The first buy occurred as circled and met the first criteria by closing above all resistance lines, as did the second.

image of VSTM trading Chart

VSTM SplitC

The Study SplitC or Time Area in Technician monitors the previous timeframes reference points all the way up to yearly data. The blue monthly line is the main focus and its relationship to its previous step up or down.  From there we look at where it is in context of the other higher timeframes. On the first signal the previous monthly step had been down. This indicated that momentum across Time had not quiet fully been met. We need to see the Step rise. By the time of the second signal Time had aligned fully with the previous monthly step moving up. This was then joined just before the buy signal by both the quarterly and semi annual (brown line) rising. This means that the bottoming process has been completed. Everything is below price.

image of VSTM trading Chart

The day after the PowwerPlay buy price exploded. We like to know why as this will give us incite into whether the move is for real. If it is chat room hype then we are wary and a little scared. If it is rumours of a takeover or a takeover of a company in the same space we are doubly scared. Just this week JMP was subject to such a rumor and the chart tells its own story.

image of VSTM trading Chart

image of the trading safely banner for markets outlook

In the immediate aftermath I could find nothing so thought is wise to take some partial profits. Later it transcribed that it was institutional buying after a company presentation. This is good news and makes the move more likely to be sustainable. The huge volume backed that story up.

image of VSTM trading Chart

VSTM Peak Energy

Whilst it could be argued that the horse has bolted, yesterday saw price make new highs and the period of reflection allows investors to micro manage the position if they wish. This involves using 30 or 60 minute charts and using the Peak Energy principle once more, but this time on 120min to half day charts. These lines become support and resistance in the same way. The 60 min chart shows the breakout as everything is below price. The move higher yesterday has now enabled the shorter timeframes to move up and create a support at 3.31.

image of VSTM trading Chart

The final piece in the jigsaw is where price can go. We like to see what we call Space. That is Space to move substantially higher. Returning to the daily chart there is no resistance until the weekly based black line at 8.07 and ultimately the monthly blue line target at 12.35.

image of VSTM trading Chart

image of the trading safely banner for markets outlook

Please note this is general advice from Trading Safely for all our clients and has been prepared without taking into account your personal objectives, financial situation or needs. If you do wish to consider acting on our information please contact a licensed financial advisor to discuss the appropriateness of this recommendation for your own personal financial circumstances. Please obtain any relevant product disclosure documents before deciding to invest. Trading derivatives, stocks and CFDs can lead to losses greater than your deposit.

trading safely analysis on Facebooktrading safely analysis on Googletrading safely analysis on Twitter

Leave a Reply

Your email address will not be published. Required fields are marked *

Translate »