Biopharma Beckons Bears Before Third-Quarter Report

Short interest accounts for over 15% of the stock's total float

by Emma Duncan

Published on Nov 4, 2019 at 11:29 AM
Updated on Jun 24, 2020 at 10:16 AM

Biopharmaceutical name Amarin Corporation plc (NASDAQ:AMRN) has had a volatile year on the charts. Stuck in a series of higher lows since early August, the AMRN is failing to fully recover from two drastic bear gaps seen earlier this year. While the $14 has cushioned drastic pullbacks of late, AMRN looks to be once again approaching a key level -- one which tends to have historically bearish implications. 

Amarin stock is up 2% this afternoon, last seen at $17.11. Per data from Schaeffer's Senior Quantitative Analyst Rocky White, this positive price action is likely to be short lived. AMRN is now within one standard deviation of the 200-day moving average. According to White, there have been two other times during the past three years the stock has tested resistance at its 200-day, and was lower one month later 100% of the time, with an average loss of 8.1%. Another drop of this magnitude would put the shares back near $15.73  by early December.

daily AMRN with 200MA

Amarin is also joining the slew of this week's earnings reports, slated to reveal third-quarter results before the open tomorrow, Nov. 5. AMRN has closed higher the day after reporting in six of the past eight quarters, averaging a swing of 4.8%, regardless of direction. This time around, the options market is pricing in a larger-than-usual 8.8% move, based on near-term straddle pricing.

All seven analysts following AMRN sport a "strong buy" recommendation on the stock. This positive sentiment is echoed with the stock's average 12-month price target of $29.11 a nearly 70% premium to current levels. In other words, the equity could be ripe for a fresh serving of downgrades and/or price-target cuts. 

Lastly, while short interest has dropped 2.5% during the most recent reporting period, it now accounts for 15.5% of the stock's total available float. At Amarin stock's average daily trading volume, it would take short sellers almost eight days to buy back their bearish bets.


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