SRPT +199% Today

I was asked earlier today if there was any evidence of a leak in SRPT's trial results that were released today, sending the stock up nearly 200% in a day.

The reason for today's elation is Sarepta's treatment for Duchenne muscular dystrophy, a drug called eteplirsen. 48-week trial data released this morning displayed incredible improvements for patients receiving a 50mg dose of the drug. In fact, the results showed some evidence that eteplirsen could help to reverse the progression of this fatal disease versus simply slowing its progression. 

Piper Jaffray also raised their $11.00 target to $38.00 in a report that was released on today.

There are 3 things I want to share with you, but first the answer to the question, "I don't know". We have seen some REALLY out of place behavior before earnings and other events including about 2 hours before an F_O_M_C policy statement where price was going aggressively one way and 3C was going aggressively the other way. These were the kind of signals you just don't ignore, we traded them and we were on the right side and I have no doubt whatsoever we were seeing actions being taken on inside information. Just yesterday there was an article about traders being expected to provide inside information for Steve Cohen's SAC fund. 

All I can say is when you see it, you know it for sure. SRPT on the other had was a stock that was trading in a very healthy manner, I don't mean price alone, 3C was confirming it all along. Typically with inside information leaks it's more of an event than a process, this was a long time process and this is why I have to say I don't know, but there was plenty of time to leak the information and someone really liked the stock well before today.

Here are a couple of charts...

 First note the change in character, volume really picked up which is one of the first changes in character we saw in UNG and that position is up roughly 25-50% already and hasn't even broken out of the base, but it's been a lot of patience; I don't think SRPT was much different in that respect.

 Here we have the typical life-cycle of a stock that repeats over and over: Stage 1 Base, Stage 2 Mark-Up, Stage 3 Distribution/Top and Stage 4 Decline. The base area in SPRT was volatile and it would have tested you emotionally on several occasions.

 If we look at the long term 3C chart it looks like the base started accumulation around May, there was a 1-day shakeout that saw a -35% intraday move and an -8% end of day decline, but it's also right there where traders would have been shaken out and supply would be abundant on stops and at a cheap price that we see not only a positive divergence, but  leading positive divergence that ran right up to the next gap up. Seven days before a +146% 1 day gap up there was a -15% intraday shakeout that closed up +5%; talk about an emotional roller coaster. When you see it in retrospect it doesn't appear to be a big deal, but on that day it would have been crushing, yet it was still pushing to new leading positive highs.

This longer term chart shows again the leading positive divergence that just grew stronger at these false breaks to the downside and this happens to a lesser degree everyday, it's one of the ways institutional money can move a lot of shares at favorable prices and they know exactly where the stops/limit orders are if you placed them with your broker.

There was another leading positive move before today's gap up, so maybe the information on how the trial was going was leaked, maybe it wasn't, but a healthy stock shows healthy underlying activity like we see here.

The last thing is, they still need FDA approval at some point and this is another place I've seen manipulation of the market in a big way. I was long a stock I can't even recall, maybe VPHM? In any case, a Bio-Tech and they were expecting an FDA letter the next morning that would either let them move forward, deny them or tell them they need more data. The stock closed around $10 and a trading buddy of mine at the time told me he was watching After Hours and big blocks were being bid, he sold his shares at $10.50 so I put my 200 shares out and got filled at $10.75 and nearly $11.00, keep in mind these were 100 lots. Within 15 minutes there was so much action as people saw the stock up 10% in After Hours and everyone thought whoever was flashing these larger block bids was in the know about the FDA letter, so retail came in and chased the stock higher. 

The next morning the FDA letter came back saying they needed more information so for all intents and purposes, the drug wasn't approved and the stock was at $5 almost immediately, a lot of retail had paid $11+ for the stock and whoever was flashing the bids did seem to know what was coming, they were just selling all of their shares in after hours by making it look like they were buying, retail was left holding the bag at more than a 50% loss in a few hours.

Bio-techs can be fun, but you should know that story.