The mother of bubble

First let me do an "IQ test": Can you tell me which company the following chart refers to? No cheating and honestly tell if you really know.

Just over a week ago, it nearly tripled (260% more precisely) overnight to the moon, trigging a phenomenal FOMO on the day. Then immediately within the next few days, it has given back almost all the gains and down to the earth again. What kind of dramatic saga we have just witnessed. If you still don't know what I'm talking about, it is an early stage biotech company, NextCure (NXTC). It jumped simply because some "good" news from its early clinical trial data and then crashed also due to the data which was found to be not so impressive. It's a typical FOMO: chasing highs first, asking later.

We have seen a similar but in a much smaller scale FOMO moment for BIIB, which I'm actively shorting. Be fair,  BIIB dose have more mature data which they claimed to be good enough for submission. But here is the thing. Following their planned submission early next year, the FDA review time even with a fast track will at least take 6 months and for this first ever drug for Alzheimer, I bet the FDA will ask for a public review with an advisory committee. There are simply so many unknowns in between that may go wrong. While I'm not saying BIIB won't succeed in this historical endeavor and actually I do wish they can for the sake of AZ patients without good treatment as of now, I just don't see it can keep at the current inflated level without cooling down first. So far so good for my short for the short term.

Biotech is the unique sector that has full of bubbly stocks that are flying above the moon for incredibly hyped stock prices. Below are the top ones which are at the nose-bleed overbought status based on the RSI: anything above 60 is usually overbought by this indicator. But we are seeing many beyond 80 and even close to 100. Of course, in a mania type of market with FOMOs everywhere, it may not be so surprising to see the extremely overbought stocks go even further overbought. Indeed there is no law prohibiting anyone chasing stocks regardless of valuation and rationale. As one who has seen many bubbles burst to cause enormous pains for many, I'm just advising caution for anyone who are willing to listen: DON'T CHASE HIGHS NOW!   

PS: if you are interested to know more about my inner cycle, DW Family, email me at: dwmt19@gmail.com