MGI Pharma Inc. Showing Life

08/04/05 01:23:40 PM

by Koos van der Merwe

MGI Pharma Inc. (MOGN) is an oncology-focused pharmaceutical company that acquires, develops and commercializes proprietary pharmaceutical products. They currently market four cancer-related products in the United States.

Security: MOGN
Position: Accumulate

The question is always, "Is it worth investing in a company of hope?" Let's face it, most biotechnology companies spend millions of dollars on research, hoping to cure a targeted disease, produce a viable product, and bring in huge profits to the company. But remember that Viagra, which brought Pfizer billions of dollars, was found by accident. Pfizer marketed a blood pressure pill, and noticed that one of the side affects was... and this led to Viagra. How many other companies can be that lucky?

Well, MGI Pharma Inc. started showing life on June 23rd, 2005 at $20, having fallen from higher levels. Let's examine the chart.

MGI Pharma.

Graphic provided by: MetaStock.

To analyze the chart I have programmed my preferred indicators into Metastock Expert Advisor. Now when I open the chart, the triggers are automatically launched.

They are:

St = RSI stochastic
F = Fisher Transform
JM = Internal trading band
Darvas = the Darvas box trading strategy

(Formulas are available via email: jsinger@globalsec.com)

I use the triggers as follows. I will buy/sell the stock on the Fisher buy/sell or RSI stochastic buy /sell, depending on which comes first. I will close out the position on a sell or on a stop-loss.

I use the JM and Darvas strategies for long-term positions. Note that on July 5th the JM strategy gave a buy and this was confirmed by a Darvas buy on July 7th. A Fisher buy and a RSI stochastic buy were received earlier, but they were closed out on July 14th, the day after the trigger on July 13th, so they closed into a rising price.

The chart also shows a consolidation triangle, suggesting a target of $34.15 should the price break out of the triangle from the low of $26.20. (27.70 - 10.75 = 7.95 + 26 20 = 34.15). Of course should the breakout occur at a higher price from a higher low, then the target could be higher.

On July 29th the Fisher Transform indicator gave a buy signal, so I would have bought for a short-term trade had I not previously bought the share on the JM or Darvas triggers for the long-term. I would now hold the share until either the target is reached, or a rising stop-loss is triggered.

Finally, I have the RSI stochastic indicator on the screen... old habits of looking at indicators rather than triggers die hard.

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.

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MGI Pharma Inc. Showing Life

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