History Says Pump the Brakes on a Clovis Oncology Stock Rally

The stock is trading near a trendline that's preceded pullbacks in the past

Managing Editor
Jan 8, 2019 at 12:12 PM
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Yesterday, Clovis Oncology Inc (NASDAQ:CLVS) surged more than 18%, after better-than-expected sales numbers for its cancer drug Rubraca, as well as a bull note from Leerink. However, the good times for CLVS may soon come to an end, if history is any guide.

Specifically, the security is trading within one standard deviation of its 80-day moving average. In the last 10 times CLVS has risen to test resistance at this moving average after a lengthy stretch below it, the equity was down nearly 7%, on average, one month out, with nine of those returns negative, per data from Schaeffer's Senior Quantitative Analyst Rocky White.

At last check, Clovis stock was up 3.5% to trade at $22.18, so a move of similar magnitude would put the drug stock back around the $20.50 level, an area that has acted as a ceiling for the past month. Despite yesterday's rally, its been a bleak picture for the security on the charts. After topping out near $66 12-months ago, CLVS carved out a path of lower lows, aided by bear gaps in August and October that culminated in an Oct. 31 bottom of $11.50.

Daily Stock Chart CLVS

Against this backdrop, it's not surprising to see ample skepticism priced into the stock. CLVS is heavily shorted, with 38.3% of the float dedicated to these bearish bets, and short interest rose 26.3% in the most recent reporting period to a record high 13.19 million shares.

However, as alluded to yesterday analysts are upbeat toward Clovis stock, with seven of nine in coverage maintaining a "buy" or better rating, and not one "sell" on the books. Additionally, the average 12-month price target of $27.10 sits in territory not seen since its earnings-induced bear gap from late October.


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