Satoshi writes, “I’m short on REGN because I think it’s oversold. Could you give me any tips of how to confirm this or if it’s also in a downtrend that could go Lower? Earnings are due on the 4th, and I want to get out before they release, but I’m expecting it to pick up in the next few weeks. What are your thoughts?”
Regeneron Pharmaceuticals is on track to hit $4.65 billion in sales this year. The annual revenue growth for the last five years has come in at a hot 55%.
Short interest in REGN is falling. Short interest in REGN was 3,851,900 but now is 3,800,300, a decrease of -1%. Not a huge drop in short interest but something you should know. On the whole, more traders are buying to cover their short positions at this level than are taking new short positions.
The strong metrics tell me that you’re shorting Regeneron not because you fundamentally believe the company is going to go out of business but instead because of temporary fundamental weakness and technical analysis of the chart.
The Symmetrical Triangle break down, and then a break below the 150 day moving average (white line) was the place to enter the short trade. Target level 1 has been hit and short sellers are taking profits as evidenced by the reduction in the short interest. These traders are the ones that got in the short early on the Symmetrical Triangle break down and confirmation break of the 150 day moving average line.
The Twiggs Money Flow suggests that REGN could go lower to Target level 2. Further, if we draw a vertical line (orange vertical line) and measure the distance at the mouth of the triangle, then extend that distance past the Symmetrical Triangle break down, we see a target of 290 on REGN.
Personally, I would take profits ASAP depending how much I was up in the trade, especially with the earnings report coming up. In a sidelines rated market, it’s too dangerous getting greedy. I played the AT&T and Time Warner merger news on Friday, and two IPOs over the last 3 weeks. In all cases, not being greedy and taking a 2% to 5% profit immediately after going long, usually within 15 minutes, saved me from taking huge losses. In my opinion, trying to time tops and bottoms is much too risky. Instead, I like to scalp the trade by getting in and out quickly and walking away with a couple hundred dollars on the trade. I’m a small little fish in a sea of sharks and so I want to just nibble and take a quick bite somewhere between the top and bottom of the swing and then swim away as fast as possible (i.e. Guerilla warfare tactics of hit and run). That $200 dollar win is worth $400 to $600 on my next trade depending on the margin requirements on the stock I’m buying. With compounding wins and margin, that $200 turns into a lot of money in just a few weeks. Getting too greedy on your trades usually results in having a winning streak, then giving all those winnings back on a losing streak.