This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

A Beaten-Down Biotech Stock Poised for an Epic Short Squeeze

Correction: Removed content that incorrectly stated that progression-free survival is a more challenging clinical trial endpoint to achieve than overall survival. The opposite is true.

DELAFIELD, Wis. (Stockpickr) -- The biotech sector is not the place to be short right now, especially when dealing with some of the beaten-down small-cap names.

>>5 Hated Earnings Stocks You Should Love

Just last week, I flagged shares of small-cap biotechnology player Geron (GERN) as a short-squeeze candidate at around $2.10 a share. Shares of GERN didn't wait long to get that short squeeze started. The stock exploded higher that same day and the following two trading sessions before tagging its recent high of $3.47 a share on June 12. That represents a gain of over 60% in just a few days for anyone who caught the move in shares of GERN.

Another biotech that absolutely annihilated the short-sellers last week was Karyopharm Therapeutics (KPTI), which exploded higher by over 90% after Wall Street cheered its release of its initial phase I data for Selinexor. I flagged this stock stock in June 3's "3 Big-Volume Stocks in Breakout Territory" at around $26.50 a share. KaPTI tagged an intraday high of $47.98 a share last week on monster upside volume.

>>5 Toxic Stocks You Should Sell This Summer

I love spotting hot biotech stocks that have the potential to make big moves and squeeze the shorts. The next biopharmaceutical player that's setting up from a technical perspective to put a big hurting on the short-sellers is Endocyte (ECYT), which develops targeted therapies for the treatment of cancer and inflammatory diseases in the U.S.

Shares of Endocyte plunged back on May 2 by a whopping 62% after the company said it was halting its phase III study for vintafolide. The company decided to stop the study after it failed to show efficiency when treating patients with platinum-resistant ovarian cancer. That was a surprise to Wall Street, especially since a recent trial Endocyte had conducted for non-small-cell lung cancer had shown favorable data.

That phase III failure and subsequent collapse in the stock price for Endocyte has now created a unique opportunity, since the company is running trials for vintafolide as a treatment for lung cancer. That trial is currently in phase IIb testing, and key data results could come out at the end of 2014. RBC Capital Markets analyst Adnan Butt recently said that the lung cancer indication is the most important one because the market is bigger.

>>5 Stocks Poised for Breakouts

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,156.85 +24.88 0.15%
S&P 500 2,001.57 +2.59 0.13%
NASDAQ 4,562.1890 +9.43 0.21%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs