Merrimack Pharmaceuticals, Inc., a biopharmaceutical company, engages in discovering, developing, and preparing to commercialize medicines paired with companion diagnostics for the treatment of cancer primarily in the United States. Its therapeutic oncology candidates in clinical development include MM-398, a nanotherapeutic encapsulation of the chemotherapy drug irinotecan, which is has completed Phase III clinical trials for the treatment of patients with metastatic pancreatic cancer whose cancer had progressed on treatment with the chemotherapy drug gemcitabine; in a Phase I clinical trial as a monotherapy in patients with glioma and in combination with cyclophosphamide in patients with pediatric solid tumors; and in a Phase 1 translational clinical trial designed to identify predictive biomarkers associated with MM-398.
Take a look at the 1-year chart of Merrimack (Nasdaq: MACK) below with my added notations:
Over the last 4 months MACK had created a key trendline of support (green), which was also a prior resistance, and that level was also the “neckline” support for the stock’s head and shoulders (H&S) reversal pattern. Above the neckline you will notice the H&S pattern itself (red).
Remember, patterns such as an H&S need to confirm to have the meaning that they imply. Confirmation of the H&S occurred when MACK broke below its trendline support.
Join our new Linkedin Group by clicking the link below:
The Tale of the Tape: MACK has confirmed a head & shoulders pattern. A short trade could be entered anywhere near the prior trendline with a stop placed above that level. A break back above that trendline could negate the forecast for a move lower, thus a long position could be considered instead.
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!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach