Receptos: “Classic” Failed Short Set-up

By | April 4, 2015

A reader asked for my technical take on biotechnology company, Receptos (RCPT):

Two weeks ago, I wrote on RealMoneyPro, the subscription side of the TheStreet.com where I am a regular contributor, that a close in lower candle range below the horizontal support line in the $140.00 area was a speculative short entry point. I noted that any short trade requires strict cover stops and careful monitoring, and the Receptos trade was a particularly speculative one. At the time, with the Relative Strength Index and the volume-weighted Money Flow Index dropping from their overbought zones and below their 21 period averages, and the MacD in bearish divergence to price, it looked like a classic technical short set-up. That was not to be the case. The stock closed below the trend line two days later but reversed the following day, and proceeded to rally against the declining broader market. The intra-day parabolic move on April 1 has the appearance of a blow-off top, but the volatility the stock has displayed has me an interested observer and not a speculator. This “classic” set-up was another example of the unpredictability of stocks and hot momentum plays in particular, and the need for a solid money management plan and strict stop-loss levels.

4403.RCPTchart

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