June 25, 2020 8:08am

Or have we fallen into an “exhaustion gap”?

Pre-open indications: 4 BUYs and 2 SELLs

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Dow futures are DOWN -0.98% (-248 points), S&P futures are DOWN -0.80% (-25 points) and NASDAQ futures are DOWN -0.27% (-27 points)

 

Stocks futures were lower in pre-open on Thursday, following a market sell-off triggered by the rising number of coronavirus cases;

  • The record spikes in new coronavirus cases in multiple states are damping hopes for a smooth economic recovery. California and Florida reported their biggest daily spikes in new coronavirus cases, while Houston said its intensive-care unit beds are near capacity. New York, New Jersey and Connecticut also ordered visitors from certain hotspot states to quarantine for 14 days. <CNBC>

European stocks were positive as investors digested the latest economic forecasts from the International Monetary Fund (IMF), a record spike in coronavirus cases in the U.S. and the pan-European Stoxx 600 was up 0.6% by mid-morning;

Asia Pacific stocks were down led by Australia and the MSCI Asia ex-Japan index slipped -0.9%.

 

Data docket: Weekly jobless claims totaled 1.48 million last week, worse than the 1.35 million estimates. Continuing claims fell by 767,000 to 19.52 million. California accounted for the biggest surge as claims remained above 1 million for the 14th straight week.

  • While the weekly numbers remained high and were worse than estimates for the second straight week, the total of those receiving benefits continued to fall. Total recipients, or continuing claims, fell by 767,000 to 19.52 million;
  • There also were 728,120 initial claims under the Pandemic Unemployment Assistance program.

 

Henry’omics:

Futures struggle after yesterday’s sell-off …still struggling with worries about the rising COVID-19 infection cases - more than 45,000 new coronavirus cases were confirmed on today, a record that surpassed the previous April 26 peak by over 9,000 cases

From the title, an “Exhaustion gap – signals the end of a move. These gaps are associated with a rapid, straight-line advance or decline.

  • A reversal day can easily help to differentiate between the Measuring gap and the Exhaustion gap.
  • When it is formed at the top with heavy volume, there is significant chance that the market is exhausted and prevailing trend is at halt which is ordinarily followed by some other area pattern development.
  • An Exhaustion gap should not be read as a major reversal yet, it is.”

 

Wednesday’s night post’s title: “infection growth spooks markets as I expected the downslide.”

  • The NASDAQ closed DOWN -222.20 points (-2.19%);
  • Wednesday opened negative and closed negative;
  • Sector volume DIMISHED with 3 out of the 9-upside having higher than the 3-month average volume and 8 out of the 24-downside having higher than the 3-month average volume;
  • Wednesday’s percentage (%) of the 9-upside were +0.55% (CLBS) to +11.60% (BSTG +$0.29) while the 24-downside ranged from -0.05% (ALNY) to -10.51% (EDIT) on news of an offering; 

Q2:

  • June registered 10 positive and 8 negative closes
  • May registered 9 negative, 11 positive closes and 1 holiday.
  • April registered 10 negative, 11 positive closes and 1 holiday.

Q1:

  • March registered 11 negative, 10 positive closes and 1 neutral close.
  • February registered 9 negative, 9 positive closes, 3 vacation days and 1 holiday.
  • January registered 9 negative, 10 positive closes and 2 holidays.

 

Companies in my headlights – It’s your decision; I provide an idea and context:

SELL;

uniQure NV (QURE) closed down -$1.83 to $62.91 and has a negative -$10.11 or -16.07% aftermarket indication after QURE and CSL Behring have entered into a licensing agreement providing CSL Behring with exclusive global rights to etranacogene dezaparvovec, QURE’s investigational gene therapy for patients with hemophilia B. Under the terms of the agreement, uniQure will receive a $450 million upfront cash payment and be eligible to receive up to $1.6 billion in payments based on regulatory and commercial milestones. QURE will also be eligible to receive tiered double-digit royalties in a range of up to a low-twenties percentage of net product sales arising from the collaboration.

Biostage (BSTG) closed up +$0.29 to $2.79 on what? NO management with past biotech experience, paying more for two (2) past executive’s “resignations” while a director, senior scientist sought the “door” after PPP loans were advanced to protect employees until, BSTG announced salary cuts then one (critical scientist) resigned). NO financial officer but, a previous employee, now a consultant who walked out without notice yet, agreed to sign the 8-K and 10-Q in return for a June ending agreement. The interim CFO walked away as BSTG’s president “interfered with the (then) on-going audit”. Who could make this up and there is more and more to come?

BUY:

CRISPR Therapeutics (CRSP) closed down -42.28 to $73.09 and has a positive +$0.24 or +0.33% aftermarket indication;

Global Blood Therapeutics (GBT) closed down -42.75 to $64.54 and has a positive +$0.54 or +0.71% aftermarket indication;

Mesoblast (MESO) closed down -$0.01 to $11.51 and has a positive +$0.29 or +2.52% aftermarket indication;

ReNeuron (RENE.L) closed flat at $132.50 and is UP +$3.50 to $136.00 on news of a new research evaluation agreement with a major U.S. biotechnology company in connection with the use of the Company's proprietary exosomes for the delivery of novel gene silencing therapeutics.

 

The BOTTOM LINE: What goes up, goes down – it’s just a matter of timing!

Markets are looking for a reason to decline having attained new highs; so, we are back to the coronavirus, COVID-19 or as some refer to it as the “Wuhan virus”.

Or are we back to a reversal pattern, as called the “island reversal” and mentioned two weeks ago…

  • In technical analysis, an island reversal is a candlestick pattern with compact trading activity within a range of prices, separated from the move preceding it. This separation is said to be caused by an exhaustion gap and the subsequent move in the opposite direction occurs as a result of a breakaway gap.

Relative strength index (RSI) reached an extremely overbought level while the “island reversal” was being formed.

 

Opinions expressed are those of the author and are subject to change, and not intended to be a forecast of future events, a guarantee of future results, nor investment advice.

Whether information or intelligence is good, bad or somewhere in between; I put into context what is relevant and useful for investors.  All investments are subject to risks. Investors should consider investment objectives.

Henry McCusker, the editor and publisher of RegMed Investors does not hold or have positions in securities referred to in this publication.