Medical Finds: Nine out of Ten
06/24/2005 12:00 am EST
"Our Schaeffer Equity Scorecard monitors 2,000 stocks in terms of ten powerful sentiment, technical, and fundamental indicators," notes Jocelynn Drake. Here, she finds a trio of bullish plays in the biotech and medical field, each earning a rank of nine out of a possible ten.
"Human Genome Sciences (HGSI NASDAQ) has popped back above its ten-day and 20-day moving averages, but is encountering staunch resistance at the 11.50 level. This region has served as both support and resistance for the shares in the past. This area is also home to the equity's 20-month moving average, which it has not closed a month above since April 2004. Investors are quite pessimistic about the biotechnology stock's prospects. The equity's open interest ratio is higher than 99% of the readings taken during the past year. Furthermore, short interest jumped by 8% during the most recent reporting period to 15.6 million shares, a new multi-year high. Not only does this accumulation of bearish bets account for 12% of the total float, but it is also more than 11 times the average daily trading volume. Wall Street hasn't exactly jumped on the equity's bandwagon either. Six of the 13 analysts following HGSI rate it a 'hold' or worse. Traders should keep a close watch on the 11.50 level. A pop above this key resistance level could result in a sharp rally.
"ID Biomedical (IDBE NASDAQ) ranks highly on our scorecard due to a combination of lingering pessimism and technical support. The company is focused on the development of vaccines based on its proprietary Proteosome intranasal delivery technology. The shares have slid sideways along support in the 14.50-15 area since October. The stock is also testing support at its ten-month moving average, which it has not closed a month below since July. Meanwhile, skepticism on the security has skyrocketed. Puts outnumbers calls in the front three months of options, and the open interest ratio is higher than all others reading taken during the past 52 weeks. In addition, while short sellers reduced their bearish bets by 32% in May, the stock's short-interest ratio still rests at a whopping 18.48 days to cover. Wall Street has largely ignored the firm, with only three brokerage houses following the stock. Any additional coverage could help to boost the equity higher.
"Viasys Healthcare (VAS NYSE) makes a range of medical instruments and devices such as life support products and devices that diagnose and treat respiratory, circulatory, and sleep-related disorders. Its also makes devices that diagnose and monitor nerve, brain, and hearing disorders, as well as critical care tube-feeding systems and wireless patient monitoring systems. The shares have stair-stepped higher since January and appear to be preparing for the next hike higher. What's more, VAS has been in a steady uptrend since hitting an August low of 13.75. In addition, the stock's ten-month and 20-month moving averages are poised for a bullish cross, which often indicates further strength for the shares. From a sentiment standpoint, short sellers have loaded up on bearish bets. The number of VAS shares sold short jumped 18% during the most recent reporting period to 1.02 million shares, resulting in a short-interest ratio of 7.47 days to cover. A short-squeeze situation could fuel a significant rally in the shares if they should continue to climb higher."