Gap and Go Trade in KERX - The PlayBook Webinar Series

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The PlayBook is a valuable Webinar event held every Thursday at SMB. Throughout the week traders submit their analyses of a particular trade. They discuss the Big Picture, any news pertaining to the particular stock at hand, and then offer a detailed explanation on why and how the trader behaved as he or she did. This week Mike and Ryan discussed the Gap and Go Trade in KERX this week. For more information on The PlayBook Webinar Series, please go to www.smbtraining.com/blog

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Gap and Go Trade in KERX - The PlayBook Webinar Series

  1. 1. The "Gap and Go" Trade Ryan McGaw KERX Ticker: Date: January 28, 2013
  2. 2. The SMB PlayBook Webinar Series
  3. 3. Gap and Go DefinedThe Gap and Go trade occurs when a stock gaps higher or lower before the market open and is able to hold the gap early in the day and continue further in the direction of the gap.The gap usually occurs due to a catalyst that attracts buyers or sellers and puts the stock in play.If a stock gaps up, consolidates and holds higher than the initial gap level (the opening range) it indicates a very strong stock and further upside.If a stock gaps down, consolidates and holds lower than the initial gap level (the opening range) it indicates a very weak stock and further downside.
  4. 4. Gap and Go StrategyThe strategy for trading a bullish gap and go is to find areas where the stock is consolidating above the gap or levels where it is safe to enter on a pullback to prior resistance that can act as support.Once the stock can break above the consolidation you have a well defined entry and should expect the stock to quickly find higher prices on the breakout.Adding at places where the buyers are able to hold the bid above the consolidation break gives room to add size with clearly defined risk.
  5. 5. Big PictureThe SPY has been in grind up mode for most of this month with gap downs being bought and support levels acting well.Today we had an inside day and closed right around 150, off the highs of 150.20.The pattern has been selling on the open and buying the rest of the day..just like today.
  6. 6. Intraday FundamentalsShares of Keryx Biopharmaceuticals Inc. soared Monday after the drug developer said its potential kidney disease drug, Zerenex, performed much better than a placebo in a late-stage clinical trial.The New York company said it plans to submit an application for approval of the drug to both the U.S. Food and Drug Administration and European regulators in this years second quarter.Zerenex met its study target for lowering phosphate levels in the blood of patients with kidney failure. Patients on Keryx’s drug showed a statistically significant reduction compared with those trial participants who were given a placebo. (As kidney function deteriorates, blood phosphate levels rise.)
  7. 7. Company DescriptionDescriptionKeryx Biopharmaceuticals, Inc., a biopharmaceutical company, focuses on the acquisition,development, and commercialization of pharmaceutical products for the treatment of renal disease inthe United States. It is developing Zerenex (ferric citrate), an oral, ferric iron-based compound thathas the capacity to bind to phosphate in the gastrointestinal tract and form non-absorbablecomplexes. Zerenex is in Phase III clinical development for the treatment of hyperphosphatemia inpatients with end-stage renal disease on dialysis. The company has sublicense agreement withJapan Tobacco Inc. and Torii Pharmaceutical Co., Ltd. for the development and commercialization offerric citrate in Japan. Keryx Biopharmaceuticals, Inc. was founded in 1997 and is headquartered inNew York, New York.AVG Volume: 2.55MATR: .61FLoat Short: 15.61%
  8. 8. Technical Analysis-Long Term
  9. 9. Technical Analysis-Short Term Important 5 level
  10. 10. Trade Management late day initial push higher is trendline a point move and a break and place to cover risk momentum add then range for added size and break..flat possibly some of the coreHuge Gapup from 3.50 possible to play the momentum above shallow pullback holds 5 is selling but pre market highs the trendline..no reason soon gets lifted and keep it tight by 2 sell yet..buy back some and is able to hitting out more stock hold above prior than you add if it to the open now holding above the 5 level and fails..cover risk into consolidating..good entry for initial .50c size or add if you have some from lower..as long as it is above the level this is a trade 2 hold and you need a reason 2 sell the corewhen 5 drops it it might be hard to be thinking long when the stock is below the pre-market levels almost halfis time to look on the open KERX way into the day but now the levels are beingfor support and dropped 5 but found regained and you have a well defined stop belowa place to get support around 4.75 the lows and you have to remember the catalystinvolved on the and formed a nice and imagine what is possible for the stockside of the rounding bottomgap..in this caselong
  11. 11. What you want to see on the tape●When watching a level, best to seebuying NEAR the level●This gives you a tight stop if you arewrong●Increases the chance of a breakout●Signals the buyers are willing to buyhigher
  12. 12. What you do not want to see• Price spike on low volume clearing thelevel you are watching●Too much risk●Need to see the stock hold above thelevel●Develop criteria for what you want to seebefore a stock breaks an important level
  13. 13. Contact Bella• mbellafiore@smbcap.com• @mikebellafiore

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