JAZZ - increased demand lifts price as FDA panel meeting nears

JAZZ pharmaceuticals will meet with a panel of medical experts on Aug 20 to grasp the likelihood of gaining the FDA's approval for its late-stage experimental drug, JZP-6 (read more about the drug here) for the treatment of fibromyalgia.

Trading Strategy
Volatility in stock price often, if not always, spikes up ahead of a significant catalyst. Based on this, I've adopted a trading strategy for small-cap biotech/pharmaceutical stocks by which shares of companies meeting a specific set of criteria are acquired at a time (~2-4 weeks) sufficiently far from the catalyst and sold just before the catalyst takes place. The criteria include 1) announcement of outstanding clinical results, 2) FDA panel meetings involving discussion of end-stage drug candidate, and/or 3) PDUFA (prescription drug use fee act) dates on which the FDA publicizes its final drug approval decision. This strategy allows traders to follow a specific and semi-predictable pattern to profit by buying low and selling high (see examples here).

Stock Update
Let's look at JAZZ right now!

Sitting merely 13 trading sessions away from FDA's panel gathering, JAZZ saw heightened trading volume today at ~15 million. This boost in the demand of the company's shares carried the price over the resistance level of $8.75. The price peaked at $9.54 at one point and closed at $8.96. What's significant is that once a stock breaks out above strong resistance, it is usually poised for a run. With the catalyst around the corner (Aug. 20), it is expected that the uptrend will continue for the next week and a half. My current target is $12 (see here for an encouraging article from TheStreet.com on JAZZ pre-panel position).