Small Cap Biotech Catalyst Watch And Trade List

Below, I have listed 5 biotechs with near-term fundamental catalysts that should see their respective prices on the move. I also list the chart for each company and offer my price target opinions based on both the fundamental catalyst and technical indicators. Fundamental factors almost always trump chart technicals, so I use the charts as a "guide" to base my entry and exit points of any trade/investment.

GTX (GTXI) engages in the discovery, development, and commercialization of small molecules for the treatment of cancer, cancer supportive care, and other serious medical conditions.

GTx is expecting to release topline data from the two pivotal clinical trials termed POWER 1 and POWER 2 for enobosarm (Ostarine®; GTx-024) sometime by late July/early August. Enobosarm is an oral selective androgen receptor modulator that GTx is developing for the prevention and treatment of muscle wasting in patients with non-small cell lung cancer.

Both of the pivotal trials were placebo-controlled, double-blinded, and were fully enrolled by the 4th quarter of 2012. The data from these trials are of the utmost importance for patients with muscle wasting because there is currently no approved treatment.

Because Insiders hold 69.28% of the company's shares, the risk of share holder dilution before the trial data catalyst is presented is highly unlikely. Capital raises via share holder dilution is certainly a huge killer of a stock's momentum.

Joseph Hyde, the former Chief Executive Officer of Autozone and director of the FedEx Corporation, is currently on GTx's board of directors and is the largest shareholder. He holds 9,405,014 shares of GTx, with a current market value of over $42,500,000.

Jack Schuler, the former President and Chief Operating Officer of Abbott Laboratories (ABT), also owns 6,954,144 shares, with a current market value of over $31,500,000. It's important to note that neither of these heavily invested insiders has sold a single share within the last year. In fact, they have continually added, with the most recent acquisition as close as March 31, 2013, by Joseph Hyde.

Considering the significant unmet need potential in treating muscle wasting along with huge insider ownership, I estimate the stock price of GTx to appreciate to around $8.50 a share before the results of the data are announced by early August, which I expect to be positive.

I really like the GTx chart setup above, as just about every indicator points to a breakout, especially the relative strength index (RSI) touching a possible breakout point. $7.75 looks to be the next stop, with some buying resistance at $7.50. I look for a new trading range between $7.30 and $7.75 to emerge soon with GTx.

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I consider GTx to be one of the better biotech catalyst trades around, and with a good data release, a move to over $11 seems likely to me, which would place its market cap over $700M -- still undervalued based on the strong unmet need here.

Trius Therapeutics (TSRX) is a biopharmaceutical company focused on the discovery, development and commercialization of innovative antibiotics for serious, life-threatening infections. Trius is developing Tedizolid for the treatment of Jack Khattar states :

As expected and as previously communicated, most recently during our May 13, 2013 quarterly earnings call, since this approval was granted before the June 22, 2013 date of expiration of the Topamax data exclusivity, this approval came in the form of a tentative approval. We will now submit the "Request for Final Approval" letter to the FDA based on which we expect to receive Final Approval and then launch our product, as anticipated, in the third quarter of 2013.

The chart above seems to indicate to me that 2 strong moves are possible, either up or down. While the accumulation looks good, the money flow index is pointing downwards, which in my experience indicates to me that shorts are getting into position, anticipating a "sell on news" However, because of the strong accumulation indicator, the shorts might also be over estimating the sell on news, and could get squeezed. Therefore, my long trade price target is $7, with a short cover price target of $6.

Because Supernus had to wait a year until exclusivity of Topamax ended, I feel investors have let this company fall of the radar. If Supernus can successfully launch its product later this year, I believe there will finally be a reversal in the downtrend that started in late 2012, which could make for nice longer term appreciation.

Disclosure: I am long GTXI.

Disclaimer: This article is intended for informational and entertainment use only, and should not be construed as professional investment advice. They are my opinions only. Trading stocks is risky -- always be sure to know and understand your risk tolerance. You can incur substantial financial losses in any trade or investment. Always do your own due diligence before buying and selling any stock, and/or consult with a licensed financial adviser.

Written By: Scott Matusow