On a big day for biotech stocks, few appear to have benefited as much as Idera Pharmaceuticals (IDRA) , which is trading up about 17.25 percent. The stock gapped up just $0.02 a share at the open but quickly got caught up in the general biotech rally, jumping up more than $0.50 a share by 11:00 am ET. The stock hit a high of $3.48 a share, a gain of 22.5 percent, but pulled back to around $3.30 a share as the afternoon wore on.
The big move lacks a clear news item motivating it, but it appears as though Idera is simply the beneficiary of positive market forces as biotechs are up across the board. The iShares NASDAQ Biotechnology Index ETF (IBB) is up over 3.5 percent while the SPDR S&P Biotech ETF (XBI) is seeing gains just shy of 4.75 percent. What’s more, biotech stocks appear to be following a similar pattern of gain as those ETFs, opening up modestly before a rapid run-up in the first 45 minutes of trading on extremely heavy volume.
So the clearest explanation for the move is simply momentum buying across the entire industry (if not the markets as a whole, the Nasdaq Composite index appears to be gaining in a similar pattern). However, there are also some technical factors that may be contributing to the fact that Idera’s gains have outpaced all but three other biotech stocks.
Idera previously touched a 14-day RSI of 70.0, a traditional sign that a stock is oversold, twice this year before experiencing a steep sell-off in late March after Summer Street Research Partners expressed skepticism regarding the company’s lead therapy, IMO-8400.
But this sell-off may have pushed the stock into oversold territory. The 14-day RSI has traded below 40.0 for most of April, including two dips below 30.0, the traditional barrier to indicate a stock is oversold. One such dip came early last week, and the stock has been trading at or near that level of 30.0 since the 14th. Include the fact that the stock crossed its 200-day SMA from above on April 11th and Idera was a stock poised to bounce back in the right conditions.
As such, it appears as though traders looking for biotech plays to take advantage of the segment’s momentum may have seen Idera as an ideal candidate. With positive clinical data on IMO-8400 coming back in late March (the news that halted its previous skid), Idera could be poised to make back some of the ground it lost during its recent sell-off. It’s currently trading over 50 percent below its 52-week high of $6.87 a share which it reached prior to the sell-off sparked by Summer Street’s negative review.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer