Anatomy of a Trade:
Here is a company that is focused on the development and commercialization of genomic-based clinical laboratory services for cancer that allow doctors and patients to make individualized treatment decisions. In 2004, they launched their first test, Oncotype DX, which has been shown to predict the likelihood of breast cancer recurrence and the likelihood of chemotherapy benefit in a large portion of early-stage breast cancer patients.
Just before the close, I bought 2,125 shares of Genomic Health, Inc. [[GHDX]] , @ $21.77 basis.
Interestingly, Genomic Health, Inc. [[GHDX]] , $21.83, formed a bullish triangle breakout on Friday, and held it throughout today, prior to it’s scheduled earnings release tomorrow. You can listen to the earnings call at 4:30 pm ET by calling 877-356-8064. Please call early enough, as the CEO will not wait for you to drag your lazy ass into his conference call.
The bullish price objective on this stock is $32.50.
With the market in oversold territory, lots of depressed equity investors, and this stock in the “favored” biotech sector, I think we can see it print that most glorious price.
I’m willing to risk about $4,800 on this trade and have set a stop loss at $19.50, a little below the 50-day MA.
If the trade hits my stop loss, I’d lose about 1% of my trading account value, which would be 10.4% of my investment in GHDX, or a little over $4,800 in cold, hard cash.
If the trade eventually hits my target price of $32.50, I would make a 49% return, or about $22,800—and my trading account would see a gain of about 4.7% from this stock.
The risk/reward is 4.75
That’s certainly above my 2.0 minimum to put on a trade.
Done.
Disclaimer: Biotech stocks can be hazardous to your peace of mind. This is not a recommendation to buy this stock, or to follow the same techniques that I employ here. Trading involves risk, and you may end up in a homeless shelter if you insist on trading without adequate capital, knowledge and discipline.
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