AMRN is a small biotech company. It is a very popular stock among small investors. The total 359 million issued shares are traded in only 44 days.
After a first FDA approval in October 2018, the stock has been in a rather wide trading range between $14 and $24.
It is interesting to note that Ahead of the FDA decision to extend the drug labeling AMRN bounced from $19 to $24. However a sell the news move combined to some third party patent challenge pushed the price down to the $19 support level.
We can see that contrary to BEAT and GWPH, AMRN is weak in terms of 20D price strength (16 out of 100) but strong in terms of large players accumulation (80.68 out of 100.) In other words: low prices attract buyers.
In terms of Supply level, we are at the left side of the NB and under a potential selling pressure of 25%. This means that many present shareholders are inclined to sell in order to stop the bleeding.
If you believe that the stock will gain traction and eventually has the potential to break above $24 in the coming weeks, then it is interesting to buy here.
The obvious risk is a break below $18.4 because this would mean that the long idea was a failure.
One possible trade here is simply to buy now at around $20 with a stop 8% lower at $18.4.
There is however another way to limit losses in case of failure: Sell today $22 April covered calls for $3. If by that date the price is above $22, then you would have made 5$ on the trade, which is a 20% gain in three months. If the price falls below $18.4 you would obviously lose $1.6 and also return a part of the $3 premium since you would probably also have to repurchase the $22 put, but at a lower price closer to $2. This means that the max loss on the trade would be about $0.6 for a max gain of $5. I believe that this is a very interesting Risk/Reward ratio.
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