Stocks are pressing up against all-time highs in what is another busy day of earnings and economic releases (FOMC interest rate decision).
As for me, I’m staying patient and waiting for my trades to come to me…not the other way around.
So far so good…
(I’m confident my trading system will make you money,click here to get my guarantee)
Not only did I make five-figures in a slow market, but I also helped clients crush it in some option trades too…
(My next trade promises you returns of 400% or better,click here for my guarantee)
However, as easy as I make options trading look, there is an even easier strategy that I trade. It’s centered around catalyst events, specifically in the biotech sector.
Why do I feel these trades are simpler to learn?
- They are repeatable- you see the same patterns over and over, like the play in SESN
- You can create a clearly defined trading plan — no guesswork— you know your timeframe, entries and exits.
- No decision fatigue. These trades typically last 1-4 weeks and don’t require too much management.
That said, I want to walk you through a recent trade I had in Ovid Therapeutics Inc. (OVID). I can assure you, it’s a trade setup we’ll see again, and one I’ll be taking advantage of in the near-future.
Read on to learn how I made $2500 in OVID and why the catalyst runup strategy is repeatable.
Now, if you don’t know yet, my FDA Insider Alerts picks are swing trades – I typically hold them between 1 and 4 weeks.
Basically, I’m looking for a catalyst event that could push the stock higher. Generally, with biotech stocks, we see traders buy into events like FDA approval dates and Phase II and III data releases.
Let’s get a quick refresher before we go over my latest FDA Insider Alerts case study.
The Phase III stage of a clinical trial is extremely important. In this stage, companies conduct a large-scale, full-fledged, and often pivotal trial in order to test the safety and efficacy of a treatment. In other words, the Phase III clinical trial is used in order to confirm the effectiveness, monitor the side effects, and compare the treatment to other commonly used treatments.
That in mind, you can see how important this data is when it comes to the catalyst runup strategy.
How I Find Trades
Now, you might be wondering, “Kyle, where can I find this data?”
Well, BioPharmCatalyst is one of my go-to tools when I’m looking for upcoming catalyst events.
Here’s a look at its FDA calendar, and how I found the catalyst in Ovid Therapeutics (OVID).
Now, last month, I saw that OVID was expected to release Phase III data for one of its treatments.
Well, that’s our catalyst there. Now, all we had to do is pair it with a chart pattern and develop a trading plan.
Remember, when we buy a stock or options for the catalyst runup, we’re looking to sell our position before the data is released. You see, we don’t really know what data the company could report… it’s just too risky, volatile, and the odds are not stacked in our favor.
Pair the Catalyst With Charts
Now, after I find a stock with a catalyst, I like to look at the charts.
Here’s the daily chart I was looking at when I was planning the trade in OVID.
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The stock has been beaten down quite a bit since October. However, it started to trade in a range between mid-March and early April. That let me know it was a good time to start buying. That said, I wanted to buy shares at prices within the blue rectangular area. More specifically, my buy zone was between $1.80 and $2.00. My target was at $2.40.
Now, if you notice, there’s a gap in price on the daily chart above. Basically, I figured if OVID could break above $2.20, it could fill the gap and trade to $2.40.
I actually was able to buy in that area.
Here’s a look at the chart as of yesterday’s close.
Sometimes, we don’t get the profit targets we want when we’re trading. Now, I was extremely patient in OVID, holding onto the stock for weeks for a $2.20 breakout. However, I wasn’t able to maximize my profits. You see, the stock hit a high of $2.12 on Monday, and $2.13 yesterday… only to pull back.
What I could’ve done at that point was sell a portion of my shares to take profits, while holding onto a core position. Even though I want to hold the stock for a bit longer… it would just be gambling because data is due May 3, and we were just getting too close to the catalyst. Consequently, I ended up selling my shares for a small winner.
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Sometimes, even when you’re extra patient… you don’t get what you want out of a trade. However, for next time, if I see a stock try to break out of an area, and fail… I’ll look to take some profits off the table in order to maximize my returns.