Pattern Recognition & DD Tutorial
Chimerix Inc ($CMRX)
This post is going to serve as a tutorial for using our Risk/Event Charts and as procedure for connecting the dots.
We do not leave analysis posts like the two Substacks referenced herein up for more than a quarter. The reason is the market is not static. The State a company or trial can change and as new information comes available the models (code) we run re-evaluate and adjust.
As should the human making the trade. Due diligence is not a one time thing. It’s a process you follow.
As you will see Chimerix was only a “buy” for a limit range of time. Buying too early would have been a grave mistake which is what most retail traders did.
You can always search X (Twitter) for any stock symbol and see what we have said before. For example,
“$CMRX from:@gravityanalyti1”
Profitable speculation often comes down to how complete a picture you can create with limited information. The more complete the picture the more confidence you have the lower the anxiety. The market is about risk and for people risk is measured by anxiety level.
From a Risk Analysis perspective CMRX entered the Entry Model channel Spring of 2022 and drifted down to the $1.00 bid compliance level (yellow horizontal risk band) in Fall of 2023. There were multiple institutional purchases during this time, as expected (green dots, larger size, larger buy.)
The company is financially sound (stop-lights top right of chart).
Prior to the initial move last year in December our proprietary ∆liquidity indicator tripped (purple bar on volume graph). This indicates the code noticed a drop in liquidity. Also, prior to the move the code identify an event (green vertical band.)
All forms of risk are color coded based on analysis the code does on the back-end.
So you have a stock that is low risk in all identified areas with an upcoming event and signs of decreasing liquidity. That was enough for us to buy in the range of 86 cents.
Here is an excerpt from the Substack post on this topic published December 9, 2024 showing the Risk/Event chart at the time.
We run a large account and play the odds based on this risk profile. Playing the odds, means we often carry 100 biotech stocks at a time - even in markets we are avoiding like this one. But this does not constitute due diligence.
So let’s do that next.
Chimerix has the following clinical assets, Dordaviprone (ONC201) and imipridone (ONC206) and a pre-clinical asset in ONC212. I am not a biochemist (my clinical work was in biophysics) neither is Shaun (his graduate work is in machine learning.)
Nor are either of us qualified or able to determine the validity of any of these assets. We do have a physician on-call but even if we didn’t there is enough information readily available. Your due diligence process may follow a different path and you may see different parts of the picture than we do.
From Science Direct, you will find publications, journal articles and conference abstracts. Some are available without a subscription. Most are available if you just email the lead author.
If you opened the top link and scan to the bottom you fill find the disclosures. This list the organization or company each investigator is associated with.
If you click on the second and repeat this process you will see that Jazz Pharmaceuticals has a Patent or Royalty agreement related to the drug ONC201.
Now, I have skipped the other assets to keep this simple. In practice per company this may take an hour or more of your time. But, this is not something that needs to be done urgently. You aren’t trying to chase a stock intraday here.
Our initial play was to sell the event news, which we did. But, after the initial spike when the stock did not retrace we re-purchased the stock at a higher price than we sold.
This is sell-high, buy-higher. Sometimes as a speculator you should do this. We were prepared and aware at the time this might be necessary.
Luckily, we maintained our call options after the first move. Otherwise giving up a dollar would have hurt.
We exited our rebuy today at an average of $8.40 cents. Some arbitrageur can keep the extra 15 cents from the acquisition by Jazz Pharmaceuticals.
I want the cash back to redeploy into other positions. I will discuss this more in chat.
Our accounts are still only recycling cash. We are not committing anymore to the market and are still waiting in cash-like assets until the Turnip-Man, sorry Tarrif-Man, stops being an idiot.
— AJ
We can be found on Twitter.
Or in Chat.
Our charts are updated everyday as new data becomes available and are available via subscription. This is because the costs of doing this analysis across 15,000 securities is not cheap. Compute is not cheap. Neither is the effort required to find these plays before they move. But, it can be done by one person, alone. If you do nothing but read. Every day. So why not use our code instead?
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