NEW BULLISH Plays
INSYS Therapeutics, Inc. - INSY - close: 39.03 change: +1.47
Stop Loss: 36.95
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on October -- at $---.--
Listed on October 18, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 540 thousand
New Positions: Yes, see below
Why We Like It:
INSY is a short squeeze candidate. The company is part of the healthcare sector, more specifically biotechnology. They currently market two drugs. One is their Subsys, which is a sublingual fentanyl spray to quickly treat pain for cancer patients. Thus far the product seems to be off to a strong start. INSY also markets a generic Dronabinol product to help treat chemotherapy induced nausea as well as anorexia related to patients with AIDS.
INSY is also developing treatments with cannabidiol, which has made headlines in the past. Cannabidiol is a component of marijuana that does not provide patients with a high. INSY has been working with cannabidiol to develop a treatment for Dravet Syndrome, a form of childhood epilepsy.
INSYS was recently granted orphan drug designation for its cannabidiol treatment for glioblastoma multiforme, which is the most aggressive version of malignant brain tumors in humans. Yet this good news has been offset by bad news that the FDA rejected the company's application for a new Dronabinol oral solution. The feds claim INSY submitted an incomplete study plan on the treatment's safety.
There is also the spectre of a federal investigation. Shares of INSY collapsed back in May after it was unveiled that one doctor in Michigan was fraudulently prescribing hundreds of INSY's Subsys painkiller treatment. This has sparked an investigation into INSY' marketing practices.
Technically shares of INSYS have been trending higher with a pattern of higher highs and higher lows. The most recent low happened to be on the day investors reacted to the FDA rejection on its dronabinol oral treatment. INSY was down about -10% intraday and then rebounded to a huge gain (Oct. 15th).
If this rally continues INSY could see a short squeeze. The most recent data listed short interest at 68.6% of the extremely small 10.19 million share float.
Tonight we are suggesting a trigger to open bullish positions at $40.25. More aggressive traders might want to consider a trigger just above $39.50 instead.
Please note that I am labeling this a higher-risk, more aggressive trade. Biotechs are already dangerous do to headline risk. INSY could be volatile with all the short interest.
Trigger @ $40.25 *Small positions to limit risk*
- Suggested Positions -
Buy INSY stock @ (trigger)
- (or for more adventurous traders, try this option) -
Buy the NOV $45 call (INSY141122c45) current ask $1.50
Option Format: symbol-year-month-day-call-strike