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A Speculative Biotech Catalyst Trade: ORMP

Stocks in this article: ORMP IBB

The third reason I like ORMP here from a trading perspective is because the stock is heavily shorted. The current short interest as a percentage of the float from ORMP is pretty high at 11.6%. According to the most recent data, ORMP has a tradable float of 7.63 million shares and 886,000 of those shares are sold short by the bears. This is the type of situation that's begging for a squeeze since we have a significant catalyst that's less than a month away.

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The final reason I like ORMP from a trading standpoint here is because a major shareholder just bought 75,000 shares, or above $796,000 worth of stock, at $10.62 per share. This same beneficial owner, Regals Capital Management, also bought 51,000 shares, or about $800,000 worth of stock, at $14.96 per share in early February. A major holder of ORMP shares is in the market buying stock right now -- that should be enough to make any trader take notice.

All things considered, this is a situation that could produce a monster short squeeze as the catalyst for ORMP gets closer. Remember, this is a trading opportunity I am highlighting here -- nothing more and nothing less -- but it's an opportunity that I think could potentially bank big dollars if ORMP can start to trend in the right direction and soon.

From a technical perspective, this stock has started to find support right around its intraday low from its previous gap-up-day zone from last December that took the stock from $6.83 to almost $14 a share. Shares of ORMP are bouncing sideways here right above the 200-day moving average, and the stock is starting to trend within range of triggering a major breakout trade. That trade will hit if ORMP manages to take out some near-term overhead resistance levels at $11.80 to $12 a share and then $12.50 a share with high volume Look for volume on that move that hits near or above its three-month average action of 734,136 shares.

Traders can look to buy ORMP off weakness as long as it's trending above its 200-day moving average at $10.25 or above its recent low of $9.64, or look to buy it off strength once it clears those breakout levels with strong volume. Keep in mind that I would want nothing to do with this stock from the long side if it broke below $9.64 with volume, since then the risk would be that ORMP could fill the gap that started at $6.83 last December.

If this stock does break out soon, then it could easily squeeze big and tag $14 to $15 a share or even $16 to $18 a share. The upper end of these targets would not be hard to hit, considering how oversold and heavily shorted ORMP is, so keep this name on your trading radar.

-- Written by Roberto Pedone in Delafield, Wis.

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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.
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