In the very short run, OXiGENE Inc. (NASDAQ:OXGN) is overbought and probably due for a setback, not unlike the all the other one-day surges and subsequent pullbacks we've seen from the stock since February of this year. Today's pop from OXGN, however, is quite different than all the rest... this time, it's got a legitimate shot at following through on the upside effort. Ergo, this little biopharma name is actually one of the market's best 'trades' right now.
First things first. OXiGENE is the developer of a drug called ZYBRESTAT - a vascular disrupting agent that is expected to fight cancerous tumors. The theory is (and the science has been fairly well validated), by cutting off the blood flow to the tumorous cells, it's easier to kill them with conventional drugs. The drug isn't on the market yet. In fact, OXGN doesn't have any drugs on the market, and isn't bearing any revenue. But, that was never the point. Like so many other pre-revenue biotech stocks, it's the premise of OXiGENE Inc. that's drawing a buying crowd.
The premise, however, isn't the reason the stock's such a strong buy right now. The attraction to OXGN here is founded on a series of clues that have appeared on the chart.
As was noted, strong, high-volume surges are nothing new for OXiGENE. In fact, the three such similar surges we saw from OXGN between February and July of this year all ended up driving the stock to even lower lows. This time is different though. This time the surge is unfurling after a couple of months' worth of well-grounded and well-supported higher lows. For the first time in over a year, shares have not only made their way above the 50-day (purple) and 100-day (gray) moving average lines, but the stock's being supported by those lines now. Even more encouraging is the fact that we've seen the short-term moving averages cross above the intermediate-term lines, for the first time in months.
Perhaps the most important difference of all working in favor of OXiGENE now is the way shares have crossed above the 200-day moving average line (green). That's a biggie, and it's not just a little volatility either. Remember, that crossover only happened after a couple of months' worth of higher lows.
Bear in mind that OXGN is still setting up at least a small pullback, just because today's pop is so strong. We may even see a slide back under the 200-day moving average line before it's all said and done. That dip is a buying opportunity though - the heavy lifting's already been done.
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