Short Trader: Bears Focusing on Alkermes

Editor's note: Formerly, Chris Schumacher's short trading ideas were available only to subscribers to TheStreet.com's Short Advisor. Now these picks are being offered to RealMoney and TheStreet.com readers.

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Biotech Alkermes(ALKS Quote) did not enjoy a strong 2006, and the stock still looks like a potentially winning short trade.

The share price fell from $26 in March to a low of $12.95 in September. Then when the broader market began to climb out of the third-quarter doldrums and moved higher into the end of the year, Alkermes' tried to participate.

The stock managed to make a reversal to a high of $17.60 at the end of October. However, as the broader market continued to mount higher in November and December, this stock failed miserably and instead retested its September lows.

Selling pressure still appears to be heavy in Alkermes, and a break of its September support around $12.95 should yield further lows.

Since August, the $15 level appears to be where most of the price reaction occurs in Alkermes. In September, a range formed for a few days at this level before the share price broke lower to $12.95.

At the end of October, after tumbling down from the $17.60 high, the price held this level and formed a lower high.

Then in November this level was tested again and held as support. Again, this move led to another lower high. Finally, the $15 level was broken at the end of November, pushing the stock down to where it is currently trading, closing at $13.37 Friday.

What was once support should now be resistance, and could set up an attractive short trade. If Alkermes' stock price retests this $15 level, that action would offer the short entry.

Alkermes (ALKS) -- Daily