Is This Biotech Stock Immune to Volatility?

When it comes to swing trading, my bread and butter is individual stocks.

Over the years, I’ve developed the ability to glance at a stock chart and tell you in 5 seconds if it’s headed up or down over the next few months.

I don’t mess around with ETFs as much. Since they’re a basket of lots of stocks, the story the chart tells is diluted. You go from forecasting a single company to forecasting a whole market.

So I wasn’t too thrilled when Mike Merson asked us to trade an ETF in last week’s Options Arena.

I was a good sport, of course. I chose the biotech sector, down 60% from its highs.

It hasn’t seen much of a bounce and, according to my Profit Radar, is a prime candidate for outperformance…

But I was itching to dive deeper and see which individual stocks would drive the sector forward.

As soon as we hopped off the call, I got to work — and found an overlooked biotech stock that seems immune to all the recent volatility…

DCPH Up While the Market’s Crashing

Deciphera Pharmaceuticals (DCPH) is a biotech company with a noble mission: developing drugs that enhance the lives of cancer patients.

If you’ve known anyone going through cancer treatment, you know how difficult it is. DCPH is trying to help patients through that process.

It’s a challenging business model — trials take years to finish and research burns through a lot of cash. So, as with any biotech stock, volatility is part of the game.

But DCPH doesn’t seem to be struggling… even in this bear market.

The stock’s price chart shows it’s in an uptrend in 2022:

Turn Your Images On

(Click here to view larger image.)

With shares holding above a key support in green, now’s a great time to add DCPH to my Bank It list.

As long as that support holds, I expect shares to run higher.

It may not be a huge run, unless DCPH makes some major developments in the near future. But at the very least, this stock seems immune to the current ebb and flow of the market.

After all, the XBI Biotech ETF I mentioned in Options Arena is down 40% this year. DCPH is up about 3%.

This isn’t the full picture, though. For that, we need to zoom out on the chart…

Turn Your Images On

(Click here to view larger image.)

As you can see, DCPH is still down 80% since the pandemic. Most stocks have recovered well past this level by now.

And just last year, shares cratered 75% in one day as DCPH struggled with its cash burn.

All this to say — this is not a stock to take lightly.

Just because a stock is down 70% to 80% doesn’t meant it can’t fall further.

Don’t forget that. Until they hit 0, stocks can always go lower.

DCPH is in a short-term uptrend. The stock could benefit as the biotech sector turns things around, but expect more volatility along the way.

DCPH is a Bank It stock today.

But if it breaks down lower, avoid it at all costs. Wait for a better entry to get in when it’s rising, like we’re seeing today.

Regards,Turn Your Images OnChad Shoop, CMTEditor, True Options Masters

Chart of the Day:Erasing History

By Mike Merson, Managing Editor, True Options Masters

Turn Your Images On

(Click here to view larger image.)

The Fed’s 75 basis point hike yesterday, which was “off the table” just a month ago, clearly hasn’t done much to calm markets.

Despite higher rates being the #1 way to combat inflation, and the recent stock market rout seemingly a direct response to high inflation, the S&P 500 is down nearly 2.5% to start today’s session.

My first downside target — the upper blue line above, representing a decade of resistance for the stock market — has been breached.

I do expect we’ll see some chop around this level to close out the week. But ultimately, stock prices look destined to hit their pre-pandemic highs. And if you ask Chad Shoop, we could even revisit the pandemic panic lows. That would represent another 10-30% in losses, and a complete erasure of the progress made since March 2020.

Whether that takes another week, or another year, is anyone’s guess. Momentum suggests to me we could reach these targets quickly.

Brave traders can look to play a bounce here, but as for myself, I’m just putting together my shopping list for when stocks make another leg down. We’ll be looking at a great opportunity to own quality, recession-proof names once the dust settles.

Regards,Mike MersonManaging Editor, True Options Masters

Previous Post
Next Post