Shares of British biotech company Synairgen ended the week up 451% and you might be wondering if its a good time to buy the stock.
Well, the short answer is NO, it is never a good idea to buy a stock just after a significant rally given that such a rally is usually followed by a pullback.
You should always wait for the stock to retrace some of its gains before establishing a position in order to minimise your risk exposure.
Keep in mind that the positive COVID-19 trial results were for a phase II clinical trial. The company still has to run a phase III clinical trial and get positive results as well before the drug can get regulatory approval.
Synairgen share price
Although the stock pulled back on Tuesday and Wednesday, I don’t think that’s the end of the pullback given the fundamental triggers that await the company.
The phase III trials will take at least a few months and the company will need to raise more funds in order to complete the process, which means that they could issue more shares to raise cash, diluting current shareholders.
There is a significant chance that Synairgen’s share price will fall in future presenting a much better buying opportunity before the release of phase III clinical trial results.