Heron Therapeutics, Inc. is a pharmaceutical company. It designs and commercializes of polymer technologies for pharmaceutical and other applications. The company develops products using its proprietary Biochronomer polymer based drug delivery technology. Its primary focus is on its product APF530, for the prevention of chemotherapy induced nausea and vomiting. The company has additional clinical and preclinical-stage programs in the area of pain management, all of which utilize its bioerodible, injectable and implantable delivery systems. Its Biochronomer technology is applicable to a range of therapeutics areas, including prevention of nausea and vomiting, pain management, control of inflammation and treatment of ophthalmic diseases.
Take a look at the 1-year chart of Heron (NASDAQ: HRTX) below with added notations:
HRTX shot higher in May and continued upward into its September high. After a sharp decline, the stock has now started trading sideways over the most recent two months. While in that sideways move, the stock has formed a common pattern known as a rectangle. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern.
The HRTX rectangle pattern has formed a resistance at $31 (red), and a $25 support (green). At some point the stock will have to break one of the two levels.
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The Tale of the Tape: HRTX is trading within a rectangle pattern. The possible long positions on the stock would be either on a pullback to $25 or on a breakout above $31. The ideal short opportunity would be on a break below $25.
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