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Biotech Stock Trading: The "ASCO Effect" Can Double Your Money in Days
By: Money Morning
Posted on April 27, 2012 at 06:00 AM EDT
At the beginning of May 2011, OXiGENE Inc. (Nasdaq: OXGN) was a relatively unremarkable biotech stock. It was trading at less than $2 a share.
The company faced questions about management turnover and its cash position. Its investors were worried about its cancer-drug pipeline.
In fact, the stock was one of the biotech sector's worst performers in 2010, and the company had to endure the ignominy of a reverse stock split in February 2011.
Then came the "ASCO Effect."
Over a nine-trading-day stretch that started the first day of May, OXiGENE shares soared 218% - on a massive spike in volume. If you include the intraday high, the stock gained as much as 245%.
This isn't an isolated case.
Each June, the American Society of Clinical Oncology (ASCO) hosts its annual meeting - an event that's attended by 30,000 people and the scene of 4,000 presentations.
Roughly two months beforehand, ASCO posts the titles of the research abstracts that will be the basis of those presentations.
Traders search those abstracts to identify the sponsoring companies - many of them development-stage oncology biotechs whose low share prices make them fodder for some fast action.
That's exactly what happened with OXiGENE at this time last year: Traders scoured ASCO's Website and found two abstracts dealing with the company's cancer drug Zybrestat.
Not long afterwards the stock zoomed.
Biotech Stocks and the ASCO Game Plan This year's ASCO annual meeting is scheduled for June 1-5 in Chicago.
The ASCO Effect move often starts in April. But there's almost always an additional stretch in May during which oncology stocks experience near-vertical spikes in very short periods.
This second leg of the ASCO Effect usually involves a large handful of stocks. And it happens every year. For instance:
OXiGENE shares, which traded as high as $6.07 during its surge last May, dropped all the way down to 92 cents each by the following October. Today, the company trades for 95 cents.
[Editor's Note: In Bill's latest research report he has identified three oncology stocks that could benefit from the "ASCO Effect." But that's only one of the ways investors can profit from them.
Bill intentionally picked companies with long-term growth potential. That gives shareholders a shot at the profits being reaped from the current surge in multi-billion-dollar biotech buyouts.
To get Bill's report - "The Biotech Buyout Binge: Why These Three Stocks Could Double Your Money in the Next Three Months" - just click here. ]
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