Exelixis reports earnings next week, and the stock just dipped to a key trendline
ImmunoGen, Inc. (NASDAQ:IMGN) shares have been on a tear in 2018, advancing more than 75% already this year. What's more, IMGN stock could have room to run, if recent history is any indicator. Meanwhile, fellow biotech Exelixis, Inc. (NASDAQ:EXEL) reports earnings next week, and EXEL stock's recent pullback to a key trendline could mean now is the time to jump on the longer-term uptrend.
IMGN Options Signal Has Been Bullish
IMGN stock appeared on our radar after sending up an options signal. Specifically, the security is one of the few stocks currently trading near a 52-week high, while simultaneously sporting relatively inexpensive near-term options. The stock's Schaeffer's Volatility Index (SVI) was at 130% yesterday, at the bottom of its annual range. Since 2008, this signal has flashed for IMGN only two other times, after which the equity went on to rally 17.78%, on average, over the next month!
As alluded to earlier, ImmunoGen stock has been on fire, more than quadrupling in just the past year. The security notched a two-year high of $12.05 on Wednesday, and was last seen trading at $11.28, up 3.9% on the day. Another 17.78% rally from current levels would place IMGN around $13.29 -- territory not charted since early 2016.
Despite the biotech stock's stellar advance, IMGN remains plagued by pessimism. The equity's Schaeffer's put/call open interest ratio (SOIR) of 2.11 is at the top of its annual range, suggesting near-term traders haven't been more put-biased in the past year. An unwinding of pessimism in the options pits could add fuel to the stock's fire.
Plus, short interest represents about a week's worth of buying power, at ImmunoGen stock's average daily trading volume, and 40% of covering analysts maintain tepid "hold" or "strong sell" opinions. A short squeeze or a flood of overdue upgrades could propel IMGN to new heights.
EXEL Could Be a Buy Before Earnings
Biotech Exelixis -- which makes cancer treatment Cabometyx -- will report quarterly earnings after the close on Monday, Feb. 26. The stock jumped 5.3% the day after its November earnings report, and the recent pullback could be a buying opportunity, if past is prologue.
Specifically, EXEL stock is now within one standard deviation of its 80-day moving average, after a lengthy stretch above this trendline. According to Schaeffer's Senior Quantitative Analyst Rocky White, there have been 10 similar retreats to this trendline, after which EXEL shares rocketed 17.88% higher, on average, in the following month!
The stock was last seen 0.8% lower on the day, trading at $28.86. From a longer-term standpoint, Exelixis stock has been in a channel of higher highs and lows since early 2016, and has skyrocketed more than 700% in that time frame. Another 17.88% rally from current levels would place EXEL around $34 -- north of its mid-October 17-year high of $32.50.
Should the company once again report well-received earnings next week, a short-covering rally could be in store. Short interest represents nearly five days' worth of pent-up buying demand, at EXEL stock's average pace of trading.