I've received a handful of questions on Immatics (IMTX) over the past week. It's a name I continue to hold, and like many other biotech names, it will test the patience of bulls. Biotechs are often hurry up and wait. We get excited, see a fantastic long-term story, and want to own shares. Unfortunately, the changes in the market have created fewer buy-and-hold traders and replaced them with buy-and-pay-me-today traders. If shares of a stock aren't moving within a few days, sometimes a few hours, after entry, I see them get thrown to the dump. Not every story will be a buy today and sell for big gains tomorrow.
Nothing, fundamentally, has changed with IMTX. I worry some of the weight of the stock came in the form of the Arya Sciences Acquisition II (ARYB) hitting the market and jumping ship. You also have the nuances of SPACs in terms of founders' shares, founders warrants, and shares used to entice the seller into the transaction. Sometimes these become akin to "free money". They hit the open market and without news drivers, the stocks slump.
Immatics recently provided a company update and gave us an Investigational New Drug (IND) catalyst potential for 2021 for the IMA204 program. It hinted that positive pre-clinical studies have increased confidence in the likelihood of the IND. Additionally, we saw the company's underlying platforms performing well in the assistance of identifying optimal approaches to treatment.
We're hinting at signs of a bottom on the chart as well. IMTX has found buying every time it has dipped below $9. The crux of an upside move is inventory at $9.40 buyers need to burn through. That aligns well with the 21-day simple moving average (SMA). There is a small bullish divergence in the Full Stochastics indicator although one does have to squint to see it. I like that the MACD is inching higher and we have a bullish flip in the parabolic stop-and-reverse (PSAR).
I won't sit here and pretend the sky is the limit in the short-term. Odds are we will hit resistance at $10.20 should we break above $9.40. That's not bad for new buyers, but won't help anyone with an average in the $11 to $12, or higher, range. I would envision $11.50 as a possible momentum run, but the hard truth is the stock may struggle to get above $11.50 without a major catalyst or breakthrough. Still, with a market cap under $600 million, this is another biotech where patient investors could be handsomely rewarded. But similar to Genprex (GNPX) , 2021 is shaping up to be the big year. There's also a chance a major catalyst could slip in during the final quarter of 2020, but I view both names the same: 2021 will be a big year, upside is at least twice the current valuation, and downside is limited to 10% from these levels.