Investing to Wealth

As a technical analyst, I look at trend a great deal.  I also look at the indicators (RSI, MACD, Stochastics and others) to confirm the trend I think I am seeing.  I look at NexMed, Inc. (NEXM) right now and I see NO trend whatsoever.

That is not necessarily a bad thing.  This could mean that they are consolidating for that next move up.  It could mean that NEXM is about to crack, too.  They are so tantalizingly close to crossing the “0″ line on the MACD which would portend a bullish trend.  But, they haven’t…yet.

Here is my annotated chart so you can see what I am talking about.

Is NEXM a good radar stock.  I think so.

NEXM is a “two-headed” pharma beast.  They are a successful CRO (contract research organization) and also a pharma company.  They have booked some strong revenues from the CRO business although the business is highly volatile.  If they have contracts in house, they are making money.  If those contracts dry up, they don’t.

The pharma side of the house engages in the development of topical pharmaceutical products based on its proprietary NexACT transdermal drug delivery technology.  They are actively seeking out-licensing agreements with pharmaceutical and biotechnology companies, worldwide. At the same time, NexMed is pursuing partnering opportunities for its NexACT-based treatments for onychomycosis, psoriasis, sexual dysfunction and cancer.

Anecdotal evidence abounds that NEXM deserves to be considered as a trade.  They are in the process of cleaning up their balance sheet (exchanging debt for equity), they have cash-in-the-bank, manageable debt, good coverage ratios, lots of insider stock acquisitions, lots of positive PR, etc…..  They are still a penny stock, but they (like every pharma company) must be dreaming of the NASDAQ or AMEX.  If they get there, that would be huge for traders and investors.

The downside risk is the “elephant in the room”.  What could cause NEXM to fall? Bad FDA news would certainly do it.  No new or significant partnership announcements, dilutive equity raises, continued losses, bad press would do it, too.

I would look to see if this level is a durable support level.  Trading sideways like it has will allow it to stabilize (hopefully) for its next move up.  The stock has already made HUGE moves this year.  From top to bottom, the stock has returned fantastic gains for any insider or long-term investor (a potential 950% gain).  Will NEXM be able to take the next step up?

We shall see.

Trade like you mean it!

Jeffrey Dean, Editor