7/2T9:02 M.M.W on MYGN

Mark My Words: MYGN buy signal

Major buy signal on MYGN. The company announced on 6/30 that the Florizan drug failed in its phase 3 trial. The stock sold off on the news for one day. Yesterday the stock exploded up 12%. There was a upgrade by a major firm, but the real reason for the big move is two fold. One, the fundamentals of the business just got really good. The drag on cash from the development of Florizan is gone and the true EPS power of the diagnostic business will now come to light. And two, there is a huge short position, 15 days, 12 million shares, 30% of the float. They will all need to cover now because the bad news is out, but unlike most biotechs this company has a real business behind its drug development. The shorts are now caught in a stock that is actually better off without the drag of drug development.

Technically the stock gave a massive buy signal yesterday. The stock was up on huge volume and was strong all day regardless of the overall market action. This was a clear reversal day and a follow through is almost a certainty. The 60 min. and daily are signalling an alligator buy together. The MACD histogram is giving a good positive divergence, and S/D is 88 (good for a biotech).