2 Drug Stocks Squeezing Shorts

BLUE and TXMD are signaling higher opens this morning

Jun 15, 2018 at 9:23 AM
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Shares of bluebird bio Inc (NASDAQ:BLUE) are up 0.5% in electronic trading, after the company reported positive early stage trial data for its LentiGlobin gene therapy in patients with sickle cell disease and thalassemia -- two blood disorders. Bluebird said it expects to submit a marketing application in the European Union (EU) later this year for LentiGlobin as a thalassemia treatment.

Looking at the charts, BLUE stock has been in a channel of higher highs and lows since bouncing off its 180-day moving average in early April -- and this rising trendline has continued to serve as support. And while the security remains off its mid-March record peak at $236.17, it's still maintaining a 10.6% year-to-date return, based on last night's close at $197.

Should the drug stock continue to climb, a continued round of short covering could create even bigger tailwinds. Although short interest is down 4.7% in the most recent reporting period, there are still 3.59 million BLUE shares sold short -- representing almost 8% of the security's float, or seven times the average daily pace of trading.

TherapeuticsMD Inc (NASDAQ:TXMD) stock is also signaling a positive open, up 5.1% ahead of the bell. J.P. Morgan Securities initiated coverage on the women's health specialist with an "overweight" rating and $11 price target -- a roughly 60% premium to last night's close at $6.88, and territory not charted since late 2015.

TXMD stock has been climbing up the charts since bottoming at a year-to-date low of $4.64 on March 27, gaining more than 48%. What's more, the shares topped out at an annual high of $7.66 one week ago today, and have since pulled back to support at their 20-day moving average.

Short sellers could help propel the security even higher. The 55.10 million TXMD shares currently sold short account for almost one-third of the stock's available float, or 20 days' worth of pent-up buying demand, at the average pace of trading.

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