3 Biotechs Breaking Out Big

Drugmakers Calithera Biosciences Inc (NASDAQ:CALA), Evoke Pharma Inc (NASDAQ:EVOK), and Pacific Biosciences of California (NASDAQ:PACB) are on fire today

Oct 7, 2015 at 2:59 PM
facebook twitter linkedin

It's been an up-and-down day for the broader market, yet the biotech sector has been charting a path steadily higher. Among the outperforming stocks are Calithera Biosciences Inc (NASDAQ:CALA), Evoke Pharma Inc (NASDAQ:EVOK), and Pacific Biosciences of California (NASDAQ:PACB). Here's a closer look at this trio of equities, as well as Wall Street's expectations.

CALA has popped almost 3% this afternoon to trade at $7.30. This represents a change of pace for a stock that's plummeted 78% since touching a mid-December record peak of $33.48.

Short sellers have been piling on amid this long-term swoon. In fact, nearly 47% of CALA's float is dedicated to short interest, representing 13 days' worth of activity, at typical trading volumes. Conversely, all three analysts tracking the shares rate them a "strong buy." Should CALA resume its withstanding trend south, a round of downgrades could ensue.

EVOK was last seen 23.6% higher at $4.08, lifted by the company's projection that its current cash resources can likely support operations for the next year. Separately, Noble Financial initiated coverage on the stock with a "buy" rating, providing another upward catalyst.

The bullish brokerage attention is par for the course. Heading into today, 100% of analysts considered EVOK worthy of a "strong buy" endorsement. Short sellers are less convinced -- as evidenced by the fact short interest nearly tripled during the last two reporting periods.

Looking at the charts, short sellers may have a point. Even after today's huge gains, EVOK is 31% lower on the year, and has seen recent spikes -- including the current one -- contained by its descending 80-day moving average.

Last but not least, Illumina, Inc. (NASDAQ:ILMN) rival PACB has jumped over 20% to hover near $7.65 -- bringing it within striking distance of its year-to-date flatline. The surge has intraday option volume running at five times the typical clip -- led by the now in-the-money November 7.50 call.

With PACB tentatively scheduled to report earnings within the next couple weeks, option bulls may be rolling the dice on post-earnings gains. Historically speaking, though, the shares have tended to fall in the session subsequent to the reports -- posting negative returns in five of the past eight quarters. With 28% of PACB's float sold short, it's also possible call buyers may be short sellers hedging against extended upward momentum. 

If you are not making money with options, you aren’t buying options like this…

There is no options strategy that more perfectly approaches trading the fastest moving and most volatile stocks available in the marketplace than this one. In fact, there is no strategy that better utilizes put options for optimal returns and a real trading edge over other traders in the exact same market. New options traders fail out at an incredible rate without proper trade research, execution timing, and option picking. Capitalize on Schaeffer’s 100+ years of options trading excellence with the most coveted product launch in company history. Don't waste another second... join us right now before the next round of trades are released!

Schaeffer's Investment Research Master Portfolio Trial


Special Offers from Schaeffer's Trading Partners