For the second time in as many days, I find myself supporting the purchase of a suddenly-bullish stock by saying "this time is different". Yesterday I was talking about OXiGENE Inc. (NASDAQ:OXGN), but today I'm using the term to describe the bullishness that's unfurling with Neurometrix Inc. (NASDAQ:NURO). And just for the record, yes, I know the perils of the "this time is different" argument. I tend to cringe when I hear it, as (too much) experience has taught me that things are rarely different - patterns within the market play themselves out over and over again. In the case of NURO as well as OXGN though, I can put my finger on something specific that we've not yet seen.
Like OXiGENE, Neurometrix is a healthcare name... probably the only sector that can give is not only these stop-on-a-dime reversals, but make them hugely rewarding. Unlike biopharma stock OXGN though, NURO is a medical device maker. It manufactures the NC-stat, a personal diabetes diagnostics tool that spots a condition called diabetic peripheral neuropathy within diabetes, and it makes the wrist-worn Sensus device, for diabetics' pain management. The two devices are jointly at the heart of the budding rally from NURO, but it's not like specific news about either has prodded the recent turnaround from the stock. No, the stock's newfound strength is materializing organically... which may be even better, in the long run.
In simplest terms, the last three years have been nothing but misery for Neurometrix Inc. shareholders. The stock's pulled back from a late-2009 peak of $129.60 to a low of $1.47 hit just last month. But (and almost imperceptibly), the downtrend has been slowing of late, and may have actually come to a stop as of October. The next step? A full-blown upside reversal, which may well have started yesterday.
It's not hard to see it on the chart of NURO below. Wednesday's gain was huge, and it came on huge volume. It also yanked the stock above all of the key short-term and intermediate-term moving average lines, the most important of which was the 100-day line (gray), which had been a ceiling for months, pushing Neurometrix Inc. shares lower again each time they attempted to rally. Merely seeing the stock do something it hadn't been able to do for months is an important clue. So is the massive volume behind the effort. So is the fact that NURO crossed above a straight-line resistance level (red) that extends back to the middle of last year. These were all "new" things for OXiGENE Inc. too.
Trading veterans who can appreciate the unlikely cross of the 100-day moving average line will also recognize that NURO hasn't yet hurdled the all-important 200-day moving average line (green). Indeed, it looks like shares tested that line on Wednesday, and failed (as it failed to hurdle the 100-day average so many times in the recent past). Not a worry. Though it merely brushed the 200-day average and then pulled back on Wednesday, the pre-market indications for today (Thursday) are strong buying, with a pre-market price of $2.45... which is above the 200-day moving average line at $2.02. In other words, today's the day.
Yes, as was the case with OXGN, such a big move from NURO will leave it quite overbought and ripe for a pullback. That's only a short-term factor though. The bullish clues that have surfaced for both OXiGENE and Neurometrix this week are bigger-picture, longer-term ideas that took months to develop, and should have an effect that lasts for months. The only thing long-termers might want to worry about is finding a short-term - and that might mean "intraday" lull to use as an entry point. The heavy lifting's been done.
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