Signal Says Proceed With Caution on This Biotech Stock

The shares of Immunomedics, Inc. (NASDAQ:IMMU) have rebounded from their annual low of $12.86 on Dec. 20, and were last seen 2.2% higher on the day to trade at $17.62. However, traders might want to exercise caution before jumping in on IMMU, with the biotech stock running up to a key trendline -- a signal that, if history is any indicator, could mean another drop from IMMU.  

To elaborate, the security has been in a channel of lower highs and lows since its mid-July peak. It has just come within one standard deviation of its 80-day moving average after a lengthy stretch below it. This signal has flashed for Immunomedics stock two other times in the past three years, with the stock lower each time one month later. Plus, IMMU stock suffered an average loss of nearly 20% one month after bounces into the 80-day, per data from Schaeffer's Senior Quantitative Analyst Rocky White. At current levels, a similar move would knock the equity back down to $14.10. 

Additional headwinds could come from analyst downgrades, too, with all five brokerage firms following IMMU doling out a "buy" or better -- not a single "hold" or "sell" to be seen. Plus, the lofty consensus 12-month price target of $37.38 is more than double current levels, leaving the biotech vulnerable to potential price-target cuts.

Despite the sunny outlook from analysts, not everyone is in the bullish camp. Short interest grew 11.5% in the past two reporting periods. Currently, the 26.07 million shares sold short represent almost a quarter of IMMU's total available float.