Cempra Inc (NASDAQ: CEMP)

Cempra, Inc., a clinical-stage pharmaceutical company, focuses on developing antibiotics to meet medical needs in the treatment of bacterial infectious diseases in North America. Its lead product candidates include solithromycin (CEM-101), which is in Phase III clinical trials for the treatment of community acquired bacterial pneumonia, as well as for uncomplicated bacterial urethritis; and Taksta, an antibiotic that has completed Phase II clinical trials for refractory bone and joint infections. The company also produces novel macrolides for non-antibiotic uses, such as the treatment of chronic inflammatory diseases, endocrine diseases, and gastric motility disorders.

Take a look at the 1-year chart of Cempra (NASDAQ: CEMP) below with added notations:

1-year chart of Cempra (NASDAQ: CEMP)

CEMP has been trading mostly sideways over the past 4 months. While in the sideways move, the stock has formed a clear resistance at $20 (red) and a solid support zone around $15 (green). At some point, the stock will have to break out of the current trading range.

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The Tale of the Tape: CEMP is trading within a large sideways range. The possible long positions on the stock would be either on a pullback to $15 or on a breakout above $20. The ideal short opportunity would be on a break below $15.

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

Follow me on Twitter: @cmtstockcoach