For his second Executive Decision segment during Monday's "Mad Money" program, Jim Cramer spoke with Dr. Henry Ji, chairman, president and CEO of Sorrento Therapeutics Inc. (SRNE) , a biotech that is working toward a treatment for Covid-19.
Ji said Sorrento's CovidTrap is a neutralizing antibody that has proven to prevent viral infection in lab testing. Sorrento is excited about its prospects as both a treatment and a preventative measure for Covid-19.
Sorrento has submitted all the paperwork with the U.S. Food and Drug Administration (FDA) to begin human trials and Ji said he expects that phase to begin in two to three months.
The company is also working on other drugs, including one to treat acute respiratory distress syndrome, which may also be of benefit in the treatment of Covid-19.
Let's check out the charts and indicators of SRNE.
In this daily bar chart of SRNE, below, we can see some unusual price movement the past few weeks. Prices gapped higher and tripled in a couple days before quickly reversing direction and giving back most of the advance. Prices are still above the rising 50-day moving average line and the rising 200-day moving average line, but I suspect that lagging moving average signals will not be much help in trading this stock. The daily volume has quickly dried up after its initial surge. The On-Balance-Volume (OBV) line jumped sharply higher in May and has since moved sideways. The Moving Average Convergence Divergence (MACD) oscillator turned bullish in April and gave us a take profits sell signal by the end of May.
In this weekly bar chart of SRNE, below, we can see that rapid run-ups and sharp retracements have happened a number of times. Buyers seem to like accumulating shares around $2 -- is that because it is the price of a lottery ticket? The weekly OBV line weakened this month and the MACD oscillator gave a buy signal.
In this Point and Figure chart of SRNE, below, we can see a potential downside price target. This chart suggests the pullback is not over.
Bottom line strategy: While some analysts may consider trading SRNE a challenge that they want to tackle, I would rather take a pass. Stocks that trade like SRNE -- a sharp rally and an equally sharp reaction -- are not my cup of tea.