Ask The Trader
Wednesday, April 25 2001
I see that Genzyme announced a split today. Since the stock is listed on the candidates list, are you recommending it as a play?
Thanks for all your hard work. My trading account has never been fatter! "Aunt B"
Thanks for writing and we are certainly glad you were able to take advantage of some of our picks. Yes, Genzyme (NASDAQ:GENZ) just announced a 2:1 split that will be payable on June 1, 2001. You are also correct in saying that GENZ was located on our split candidate list. Although, since it just announced a split, we moved it over to our split catalog.
From your question, I get the impression that you are assuming that all the stocks on our split candidate list are currently being recommended as a play. In fact, these are all the stocks that we believe have a good chance of announcing a split in the near future. If you click on our Current Play section, however, you can get a list of the select split candidates that we are recommending as a play for that particular day.
As far as how GENZ looks for a trade right now, let's turn to the charts.
We have been watching GENZ trace a wide base pattern that started way back in mid December. All the while we were encouraged by the fact that as the AMEX Biotech Index (BTK.X) headed south, GENZ held its own. This divergence was a sign of good relative strength that kept us tuned into GENZ as a possible play. It stands to reason that the strongest stocks in a weak sector will be the first to move higher when the market improves.
Lately, GENZ has headed north on a series of analyst upgrades and a positive earnings report that showed good revenue growth in its two key drugs, Renagel and Cerezyme. The stock has formed a flag pattern and looks poised to break out to the up side. We are waiting for a break above $110 (resistance) on volume of at least 2.5 million shares traded before we take the plunge. If GENZ can break this level, our near term target for the stock is $127 according to the height of the flagpole.
As mentioned, GENZ diverged from the BTK.X in a big way. This is your first tip off that GENZ is a good play candidate.
Good Luck and Have a Profitable Trading Day
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