Short ONXX?

[WallStreetnBio]

Recent Analyst Downgrade

<Friedman Billings Ramsey Jim Reddoch downgraded Onyx to "Underperform" from "Market Perform," because its price had risen too high. The analyst also boosted his price target to $17 from $12.
In a research note, Reddoch warned that the liver cancer treatment market is still a small one with estimated U.S. sales of $187 million in 2010, up from the analyst's previous estimate of $72 million.
Nexavar also faces a threat from Sutent, a Pfizer Inc. drug that's currently approved for kidney cancer, Reddoch said. Nexavar received FDA-approval for kidney cancer in December 2005, and Sutent gained approval the next month. Sutent is currently in mid-stage clinical trials for liver cancer.>

This is just my thesis and any comments are welcomed. The initial gain in the stock was short covering and short term traders chasing the rally. The gain the following day was shorts trying to short too early while other shorts were still scrambling to cover.  Again I'm assuming there were longs chasing the rally.  Wednesday I believe there will be some early morning volatility while investors chase it in the a.m. and the stock price looks for a direction.  That being said I believe the buying power (volume) isn't going to be there tomorrow.  ONXX may trade sideways before it starts the downward move but I'm not taking any chances on missing the run so I will open a short position in the morning leaving me room to add to the position.  Onyx reports earnings on Thursday which should give the stock some support but all news is already out and there can only be cheerleading by the CEO. If any sideways trading occurs that $17 price target is going to shake out all the weak hands.  I don't know if we will see the $17 price target by Friedman Billings but we will see $20 easy.

The catalyst being the cancer drug is estimated to have $187 million in sales in 2010.  Onyx has to split the profits with Bayer.  Now the question is what is the profit margin on this cancer drug?  Pfizer is also introducing a cancer drug of there own which will take market share from the $187 million in revenues.  These drug companies only have a limited window before the generic drug makers step in. To me it seems like most biotech's like Onyx will drift lower over time then spike on news only to drift lower over time again.

I know some of you don't like the technical indicators but I like them to give me a feel for a stock.  As you can see the oscillators signal overbought.  Any sideways trading will send the MACD through the signal line.  When the volume dies down and the buying slows down I think the downtrend will start which I believe is tomorrow.

Sorry I didn't post a chart I couldn't figure that out.

Maybe I'm wrong but I don't see a $26.00 price being justified given the information. Well there's my thesis so feel free to tare it apart or add your two cents. Thanks!