All points to time restraints and need to raise funs23 Jul 2020 22:01
COMMENT
Synairgen shows how to play soaring prices
Michael Taylor explains his strategy for trading ultra-volatile shares
THE TRADER
It’s not often you see a stock up 500 per cent in a single day. In fact, I’m not sure I’ve ever seen it in my career so far, but any statement that announces positive results in hospitalised Covid-19 patients was always going to see a lot of interest.
The announcement came from Synairgen (SNG), of course, and revealed that patients who received SNG001 had a 79 per cent lower risk of developing severe disease compared with the placebo, and that those who received SNG001 were more than twice as likely to recover from Covid-19 as those on placebo.
Now, these are exciting results. But they are Phase II results only and still need the heavy work, funding, and patience of undergoing a Phase III trial. However, in trading that doesn’t matter. What matters is the here and the now; the supply and the demand. If you don’t intend to stick around for longer than a few days, then it means there is very little background work to do, and you can play the cards in front of you for what they are worth – or rather what you feel the market will feel they are worth. That last point is especially pertinent. In a game of short-term speculation and hyped up emotion, fundamentals may as well be torn up and thrown in the bin (although it’s worth noting that any broker note that supports one’s short-term view tends to be lauded as “excellent research” by a company’s fans).
Stocks can also fall out of favour just as quickly as they were in favour. Last week, it was Boohoo (Boo) with large volatility swings as they were accused of underpaying workers. The volatility is still higher than average, but traders need to go where the action is. A surfer can be the best in the world but if there aren’t waves – they will struggle. Like surfers, we need volatility – and this week it has been Synairgen.
Synairgen was a favourite of hero-to-zero Neil Woodford, a man who I think should be in front of the regulator rather than setting up another shop. The Times wrote that “If only people had placed more faith in the biotech genius of Neil Woodford”. Does a genius mean taking on excessive risk, stuffing an income portfolio with biotech specs, and abusing the trust of investors by using their money to do something the fund wasn’t intended for? If only people had overlooked this all of this and had faith, then yes, investors could have been rewarded with a huge share price rise from the result a speculative gamble. That is, of course, exactly what it is. Taking a position before a big announcement is a gamble. Sometimes these pay off, and sometimes they don’t. Last year, many were positioned long (and no doubt some on leverage) on Motif Bio (MTFB) in anticipation of The Food and Drug Administration (FDA) approving a drug. The FDA had helped design both Motif’s Phase III trials, REVIVE-1 and REVIVE-2, and so it was expected that it would gran
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