Todays Big Stock: CEPHEID (NasdaqGS: CPHD)

With the stock market having had several rough weeks over the past few months, most stocks seem to be trending lower. Although I have yet to find any stocks that haven’t sold off to some extent, there are a few stocks still maintaining an overall trend higher. Stocks that have maintained their trend higher through the current market sell-off could be the ones that rally strongest if the market eventually does move higher. If nothing else, these might be stocks that drop the least on any future market sell-offs. One such stock that may fit that description would be Cepheid (CPHD).

Cepheid is a molecular diagnostics company that develops, manufactures, and markets fully-integrated systems for testing in the clinical market. The company’s systems enable molecular testing for organisms and genetic-based diseases by automating otherwise manual laboratory procedures. Its systems integrate these steps and analyze biological samples in its test cartridges. Cepheid’s two principal systems are the GeneXpert and SmartCycler. The GeneXpert system, its primary offering in the clinical market, integrates sample preparation in addition to deoxyribonucleic acid (DNA) amplification and detection. The GeneXpert system is designed for a range of user types. The SmartCycler system integrates DNA amplification and detection to allow analysis of a sample.

To review Cepheid’s stock, please take a look at the 1-year chart of CPHD (Cepheid) below with my added notations:

Although CPHD had a rough couple of weeks at the end of July and into August, the stock has continued its overall trend higher and is holding its ground pretty well. After pulling back to its strong $30 level (green), the stock has bounced and is making a move back up towards its $35 resistance (red). If CPHD can break through that $35 resistance, the stock should make a run back to its $40 high (blue). However, if the market stalls and starts to sell-off again, CPHD will probably pull back down to the $30 level. A break of that level would pave the way for lower prices for the stock.

The Tale of the Tape: CPHD is currently in a sideways move, but is still in an overall trend higher. CPHD has an important level at both $30 and $35. A long position could be entered on a pullback to $30, or even better, on a breakout above $35 with a stop below the level of entry. If you have a more bearish view, short trades could be made at $35 or if the stock were to break the $30 level of support.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!
Christian Tharp, CMT