Cardiome Pharma Corp. may need to retest the $4.60 lows

Mar 14th, 2011 – Comment

Given the selling momentum we may have to retest the lows at $4.60 before we get some buying conviction.


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Hi Lou,

I had the misfortune of holding a large position of Cardiome for 15 years, and the latest news does not look good. What is your opinion of the company now and should I sell now and move on, I averaged $10.00 per share.

Thanks,

 Alijah

 

Hi Alijah,

May last post on Cardiome Pharma Corp.( COM TSX) was on May 31, 2010 for Mario. At the time it looked like COM had gotten ahead of itself. It was recommended that Mario wait for a convincing break above $9.00, where there was resistance and confirmation of support at $8.00, before committing new capital. The advice proved valuable as the stock gave up a lot of ground soon after the report.

The charts will provide a good basis to help you answer the questions you have asked.

The three year chart tells the story of COM as it traded in a range bound pattern through August of 2010. It bounced off support at $8.00 and met resistance at $9.00 through five oscillations but then burned through support all the way to $4.60 in November of 2010. It did catch a bounce off the lows and advanced to $7.00 where it met resistance along the 200 day moving average.

The best outcome from this point would be for COM to trade in a range between resistance at $7.00 and support at $5.00

The six month chart illustrates investor reaction to the Q4 results reported on March 10, 2011. Not good to say the least. At this point it looks like we will be lucky to climb back to support at $5.00. Given the selling momentum we may have to retest the lows at $4.60 before we get some buying conviction.

In terms of your dilemma I would say most of the problem is holding a non dividend paying stock for 15 years. You could have been trading this one for income as COM has provided lots of opportunities to generate profits since 1996.

 I don’t know if you should sell now and move on but I do know that if you have been in it for all these years I would assume you know the story very well. If you can leverage that knowledge with some trading signals I think you will be well served marrying the two.

Happy Capitalism!

Categories: Pharmaceuticals
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