Shares of Open Orphan PLC (LON: ORPH) have fallen 29.4% since hitting a high of 47.25p on April 12, 2021, despite the company making several positive announcements. Here’s why the downtrend has been intact for several weeks.
The downtrend started after the biotech company announced that it was planning to demerge some of its non-core businesses, mainly drug development initiatives such as its HVO-001 small molecule immunomodulatory drug, which could treat severe flu.
I covered the demerger in a different article linked below, noting that it would not significantly impact the biotech company’s revenues, but this did little to stop the downtrend, which has been in place since the announcement mid-April.
However, there is a technical explanation for the decline, which occurred at the top of a 5-day parabolic rally in open Orphan stock, typically followed by a selloff that eradicates most of the gains made during the rally.
Open Orphan shares are trading near the point where the parabolic rally began, which could be great for bullish traders if the shares reverse.
The biotech company’s shares are almost exhausting the bearish move linked to the parabolic rally, and it will be interesting to see how the shares behave going forward.
The 32p level could act as support stopping the downtrend and triggering a new uptrend if the bulls step up and defend it, which is a highly likely possibility, but only time will tell.
However, if the 32p level does not hold, the stock could fall to the 28p level and lower if it breaks below this level.
Open orphan’s fundamentals are extremely bullish given that it recently signed a £3 million contract with Imperial College London to develop a new SARS-CoV-2 challenge virus based on new emerging variants of the virus.
Therefore, the bullish case for the company is quite strong, but nothing is guaranteed in the markets.
Open Orphan share price.
Open Orphan shares fell 5% to trade at 33.35p, bringing their total losses from April’s high of 47.25p to 29.42%.
Open Orphan shares are traded on the London stock exchange's AIM market (the alternative investment market), which is the submarket specifically for smaller companies. AIM stocks are attractive to investors as they have tax advantages and smaller companies have the potential to benefit from rapid growth. Our stock market analysts regularly review the market and share their picks for high growth companies. Click and see why they have chosen Open Orphan as one of the best AIM shares to buy now.
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