If you happened to catch - and respond to - my bullish thoughts on Arca Biopharma Inc. (NASDAQ:ABIO) from December 20th and/or January 2nd, then congratulations. You're now up anywhere between 29% and 42%, depending on which of the two write-ups prompted your entry into an ABIO trade. No matter when you got into Arca Biopharma though, here this now - it's time to lock in your profits and get out. Today's big 25% jump has carried the stock to what I see as its near-term maximum value, and rather than ride out a dip, it would make more sense to step out now.
I have little doubt that merely suggesting ABIO is a sell now will ruffle some feathers. One reason for that is the fact that this company is well-loved by more than a handful of traders, particular after today's jump. Any threat to its current value (and selling it would be such a threat) is resisted... vocally. The other reason that suggesting some profit-taking on Arca Biopharma now won't be well-received is just that traders only got into it a few days ago; now they have to reverse that position already.
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If you fall into either of those two camps, or even if you fall into neither, hear me out. It's nothing personal. It's just business, based on the new risk/reward scenario that materialized today after the 25% surge.
Actually, the chart of Arca Biopharma Inc. below says it all. Not only is the stock overextended, it left behind a huge gap with today's strong open. If you look closer at today's bar, you'll see something else that's a little alarming for current ABIO owners - the stock is struggling to hold onto its intraday gains, and seems to be stuck very near its low (and open) for the day. This suggests that the transition from a net-bullish to a net-bearish environment is completing today.
With all of that being said, know that selling ABIO now doesn't mean you can't buy it back later, perhaps getting in again at a price near your entry price from just a few days ago. After all, the brewing bullishness I pointed out had developed a few days ago was bigger-picture, longer-term bullishness, and that undertow hasn't changed. If you can avoid taking a 25% hit on your Arca Biopharma position though - even if it's just temporary - then that's the prudent thing to do.
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