When A Stock Doubles In The Premarket
Looking Beyond A Broken Chart
Last Friday, Capricor Therapeutics (CAPR 0.00%↑) was trading near $4 after falling nearly 80% from its July 24th close. We entered an options trade on it then, as we detailed in this alert:
This was the structure we presented to subscribers, with the FDA’s August 22nd action date for Deramiocel, its experimental treatment for Duchenne muscular dystrophy, in mind:
The technicals at the time were terrible, as you can see above. An RSI (Relative Strength Index) below 30 is usually considered oversold; CAPR had an abysmal RSI of 12. And on a scale of 0-to-10, with 0 being the absolute worst, CAPR had a Chartmill technical rating of 0.
CAPR remained a high-risk biotech binary. An FDA advisory committee had voted 9–3 against approval for the cardiomyopathy indication, but the company’s Phase 3 trial had met its primary endpoint in upper-limb function. Our trade structure preserved exposure to a favorable surprise while capping the loss from another collapse.
On yesterday’s earnings call, Capricor said it plans to amend its biologics license application with 24-month extension data and additional analyses supporting a refined upper-limb indication. The FDA has indicated that it is willing to review the amendment and extend the action date after receiving it. At the time of this writing, CAPR was trading near $8.50 in the premarket, up about 102% from Thursday’s $4.21 close.
With CAPR trading near $8.50, our trade is on track for a ~370% gain on premium outlay, assuming CAPR is at $8.50 at the September expiration and we buy-to-close the short call and exit the put spread for a combined $0.20.
Why We Keep Following Multibaggers
CAPR illustrates the potential value of our Multibaggers list, a subset of our Market Watchers X list composed of accounts with multiple 100%+ winners. The list supplies potential alpha; our technical screens, catalyst work, options structures, and price discipline determine when and how we act on it.
That’s why we’re taking new swings at two Multibaggers trades whose day orders didn’t fill on Wednesday, and Thursday. We let those orders expire rather than overpay for them. Today we’ve repriced both structures and are applying the same discipline: if the option market doesn’t meet our limits, we won’t take the trades.
The first company is a psychedelic-therapy developer preparing a global pivotal program after a successful Phase 2b trial. The second is uniQure N.V. (QURE 0.00%↑), whose AMT-130 gene therapy for Huntington’s disease now has a long-dated regulatory runway spanning the United States, the United Kingdom, and early European engagement.
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