Rigel (RIGL)

Company

"Rigel is a clinical-stage drug development company that discovers and develops novel, small-molecule drugs for the treatment of inflammatory diseases, cancer and viral diseases." (company website)

RIGL 3-month stock chart

Sell short

I've come to the conclusion that MarketEdge recommendations must be made in the context of a different timeframe than mine. Whereas they call RIGL a "buy" see a "weak upward trend" I see a stock that has repeatedly failed tests of a resistance line since peaking in mid-December. With the one-month moving average falling and the Bollinger bands tending downward, I chose to make a contrarian bet by going short.

  • Price momentum (PPO) — falling sharply in last 1½ months
  • Trend (ADX) — strengthening, but selling pressure (-DI) is above buying pressure (+DI) and is getting stronger
  • Money flow (CMF) — stable with slight inflow
  • Relative strength (RSI) — gradually weakening
  • Volume — stable

On Monday morning, RIGL reported falling revenue and a wider quarterly loss; inexplicably, the price immediately rallied, although it did soon fall back. That would tend to confirm my view of the stock.

RIGL 2-month chart RIGL 10-week chart

Buy to cover

gain Bottom line
11%

I decided to cover my position in RIGL this morning.

A week ago, RIGL dipped below the $9.75 level and since floated mostly between that and $10. I was quite content to hold my short position, inasmuch as RIGL was still trading far below the trend line. This morning, however, RIGL began climbing rapidly after 45 minutes of trading (see chart below).

RIGL 12-Mar-07 session RIGL 1-minute bars, 12-Mar-07

My great worry with pharmaceutical stocks is that some bit of news or a juicy rumor can move the price quickly. It's entirely possible that this was just another "last gasp" before taking another plunge, but I just didn't want to risk it. I prefer to bank nice profits rather than watch them get be gradually eaten up.