Making Money on Bio/Pharm Plays
The main issue people face with investing in the stock market is making consistent returns. Both swing traders and day traders have an end goal of making money based on the shorter term holding of stocks. Swing traders typically hold a stock for a month, to a few months, and day traders make all their deals happen in the timespan of a day. I don't consider myself to be a day trader, but I am definitely an avid swing trader. Swing trading isn't for everyone, and that why I am going to share how I've made consistent returns with my swing trades.
The first and most important part of swing trading is RESEARCH! By research I mean YOU doing due diligence on a company, not a Youtuber/Twitter expert you follow. Understanding what a company does and how they make money is very important in swing trading. If a company doesn't make money but has a history of running due to catalysts, this is something the research will show. This is an easy way to tell if a stock is a long term hold or just a swing trade. I never swing trade my long term stocks; it gets too confusing so I keep them separate. Now let's talk about how I make money on swing trades, and how anyone can do it.
Recently I started a position in a pharmaceutical company called Spectrum Pharmaceuticals. I started this position because they have a catalyst coming up. This catalyst is a PDUFA date coming on September 9. This is a very important date for the stock because it will determine if the company will be able to make a product that will be available to the public. I typically buy these stocks at lows around 3-6 months before their data is released. This gives it enough time to appreciate in value before the last minute buying happens! Now these types of swing trades are very dangerous. I will talk about the dangers of this in an other blog because there are a LOT of things to watch out for, and this is just a simplified version of how I swing trade. So if this PDUFA date comes and the product is cleared by the FDA as being safe for the public, and the product shows to help the issue it is being created to help, the stock will usually see a reaction from this. The smaller the market cap, the bigger the reaction. Today on the top gainer list was a Pharm company that ran 89% on positive study news. There was also a biotech stock that dropped 21%, so you have to be careful.
With Spectrum Pharmaceuticals big date coming up, I picked up about $100 worth of shares. I will add more shares if it dips, and if it runs on random news I will sell some. You never want to hold these stocks long because they are very sporadic! The big thing that has helped me win with this strategy is selling a few days before the PDUFA data comes out. I know this might sound weird to be selling before the stock has a chance to run hundreds of percent, but trust me on this. Most of the time the results are negative. This causes the stock to drop insane amounts and very quickly. Usually its down before the market even opens because of pre-market trading. I sell about 90% of my position before the big date because by that point, many other people are onto the catalyst date as well, so the stock has run a decent amount. By decent I mean 20%-30%, not 300% like it could. I do like to keep some money in if I'm very confident in the catalyst. You can do a lot of research on these catalysts and see what experts think, but any number of things could go wrong or right. Taking my money early allows me to keep profits and keep some skin in the game.
I've only been trying this strategy for about a year now. With the bear market taking over it has been very difficult to find these stocks. It is very fun and keeps me busy, but I have to be on my phone constantly tracking the news. This strategy isn't for everyone, and I would recommend trying with a little big of money first to see how you do. Hopefully this gives you something new to try! Let me know in the comments, and as always, thank you for spending your time here.