IVAX Basing
Even in this market, you can find
basing stocks nearing new high ground. Consider IVAX. Â
Amex-listed IVAX Corp.
(
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PowerRating) said
a federal court in Washington has dismissed a request for an injunction
preventing the drug maker from making a generic version of the blockbuster
cancer drug Taxol. As Reuters reported, the motion for court order was brought
by American Bioscience, which owns a patent on paclitaxel, the active ingredient
in Bristol-Myers Squibb’s
(
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PowerRating) Taxol.
IVAX President Neil Flanzraich told
CNBC that he expects the Miami-based company to launch its generic Taxol in a
couple of weeks.
The stock gained fractionally on
sub-par volume and gave up most of the day’s gains. So in my book, it failed to respond to the news. Nevertheless, it is basing at the end of a correction-recovery pattern capping a long advance. So the trend is positive. To prove
itself, a high volume breakout is critical. As an intermediate-term trader, I’d
set my pivot at 48 1/2, just above recent resistance (see Point
A in the above chart). But I’d steer clear if the stock took out the pivot on anything less than heavy trade.
I like the prior day shake out (see
Point B). Notice how someone got scared and jumped out, sending the share price
south, but right away, buyers came in and buoyed the stock to close near the
high of the day’s trading range. Out go weak holders, in come new buyers. That
kind of action can set up a stock for run. Beware, though, that this is a highly volatile stock.Â
All stocks are speculative. In
any new trade, reduce your risk by limiting your position size and setting a
protective price stop where you will sell your new buy or cover your short in
case the market turns against you. For an introduction to combining price stops
with position sizing, see my lesson,
Risky Business. For further treatment of these and related topics,
check out the Money
Management area of TradingMarkets’ Stocks Education section.