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A Look At NeoPharm Inc.

01/21/05 02:04:54 PM
by Koos van der Merwe

NeoPharm is a biopharmaceutical company engaged in the research, development, and commercialization of drugs for the treatment of various cancers. Should we keep an eye on it?

Security:   NEOL
Position:   N/A

NeoPharm is a biopharmaceutical company engaged in the research, development, and commercialization of drugs for the treatment of various cancers. They have built their drug portfolio based on their two novel proprietary technology platforms: an electrostatic liposome drug delivery platform and a tumor-targeting platform.

Every morning, I run my Technifilter Plus program to identify stocks that meet the parameters I have chosen. NeoPharm was one of those I identified.


My next step was to determine the purpose of the company, and gauge insider activity. When I saw that insiders were buyers, and that activity was zero, I then ran a chart of the company to determine whether I would like to own the stock.

Biotech companies scare me. I have a pharmaceutical background, and I have seen too many biotech companies spend years and millions of dollars researching a drug or combination of drugs, only to come to a negative conclusion. I am continually reminded of the researcher in Japan who spent his life looking for the unipole behind gravity, only to announce with satisfaction that "my lifetime of study has proved conclusively that one does not exist." Had he been a corporation, years of research would have ended up having zero value, depending on your point of view.

Figure 1: NeoPharm Inc. When I saw that insiders were buyers, and that activity was zero, I then ran a chart of the company to determine whether I would like to own the stock.
Graphic provided by: AdvancedGET.
 
Looking at the chart, the first thing I noticed was the head & shoulders pattern that gave me a target of $14.88. The next thing I noticed was what appears to be a broadening formation. This type of formation suggests that the share price could be very unstable, and that any purchase should be made with caution.

Then I looked at the volume and saw that as the share price fell, volume fell. This meant that sellers were drying up. The commodity channel index (CCI)(20) was suggesting a buy, and the stochastic indicator with my preferred parameters (7,10,3) was oversold. Finally, the moving average convergence/divergence (MACD) indicator, which is a trend-following indicator and can be used for more conservative investing, was still negative.

All this suggests that we should slowly start accumulating. We could wait for the MACD to give a buy signal, or for a break above $13.97, with the high reached on December 16. Whatever your decision, place this share on your watchlist. Insiders seem to like it.



Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

Address: 3256 West 24th Ave
Vancouver, BC
Phone # for sales: 6042634214
E-mail address: petroosp@gmail.com

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Date: 01/21/05Rank: 3Comment: 
Date: 02/04/05Rank: 3Comment: 
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