As a busy week for US fundamental data begins, there will be some undoubted volatility across the stock markets. Here are a couple to keep an eye on…
Chelsea Therapeutics International Ltd. (CHTP)
First up on today’s list in Chelsea Therapeutics International Ltd. The company is a development stage pharmaceutical, which focuses on the acquisition, development, and commercialization of pharmaceutical products for the treatment of various human diseases. The company is expected to report its first quarter 2014 earnings early may, but that is not the trade on this occasion. Towards the end of last week the company, currently valued at just shy of $400M, is rumoured to be top of the buyout list for a number of big pharma companies. Any such buyout would likely add 20-25% on to the company’s market capitalization. one of the phrases often used in these sorts of “market rumour” situations is “buy the rumour – sell the fact”, meaning that the company’s stock will likely rise right up until the point at which an announcement concerning the potential buyout is made. With this in mind, look for an initial target of Friday highs at 5.36.
Sohu.com Inc. (SOHU)
Today’s second stock tip is also somewhat divergent from the norm. Instead of a buy on better than expected earnings, Sohu, a Chinese internet company, is a prime short candidate. The company missed considerably missed expectations in its latest earnings on Monday, reporting a GAAP net loss of $79 million, or $2.05 loss per fully-diluted share. In addition, the company’s charts suggest it is technically primed for a big drop. Closing at 58.00 flat on Friday, a break below would validate a strong downside bias with an initial target at 50.00. A quick note on short trades – the nature of such trades means that inherently, the potential losses are unlimited. For this reason it is vitally important to use a stop loss when you enter.
To contact the reporter of this story: Samuel Rae at Samuel@forexminute.com