Cardiome Pharma hitting resistance at $9.00

May 31st, 2010 – Comment

Before you commit new money to your existing position in COM let it make a sustained break above $9.00 and watch for continued support at $8.00 so that you hold onto the profits you have already earned.


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CARDIOME

 

Hi Lou,

What’s your take on Cardiome Pharma ? It seems to be performing amazingly well so far this year including through the recent ” correction ” – I was thinking about increasing my position – any advice Lou ?

Thanks !

Mario

 

Hi Mario,

I have been asked a number of times over the last 7 years to take a look at Cardiome Pharma Corp. (COM TSX). With a few exceptions the stock has been in a sell off for most of the last 5 years after hitting a high close to $15.00 in July of 2005. It spiked back to $13.00 in 2008 but it was for a short period that wasn’t sustained. Lets run a few tests to see if adding to your position will improve your financial health.

com

The three year chart provides a view of the spike high at $13.00 in 2008 and then the steep drop to the lows of March of  2009. COM traded in a channel between support at $4.00 and resistance at $5.00 for most of the next 9 month. The stock broke above the $5.00 resistance level in December of 2009 and advanced aggressively to its current high at $9.00.

If you look at the gap between the current price of COM and the 200 day moving average you can see that there is quite a bit of space. This usually suggests that a stock has perhaps gotten ahead of itself and could be on the verge of a pull back. What is also evident at this time is that $9.00 has become a line of resistance.

com#2

The six month chart  illustrates the overhead resistance at $9.00 and the golden cross that formed after January 18, 2010. In late April the MACD turned lower indicating that advance that started in December 2009 was starting to weaken.  Even though the MACD looks to be trying to turn higher volume has been thinning out lately which puts a caution flag on the track calling into question the recent bounce off the 50 day moving average before May 25, 2010.

Before you commit new money to your existing position in COM let it make a sustained break above $9.00 and watch for continued support at $8.00 so that you hold onto the profits you have already earned.

Happy Capitalism!

Categories: Pharmaceuticals
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