Is Akorn Inc An Easy Buy This Week?

This week, Akorn, Inc. AKRX offers a great buying opportunity for a short-term swing trade.

As a stock, Akorn has a bevy of favorable characteristics that make this set-up a swing-trader's dream. The stock is situated in the Pharmaceuticals sub-industry, dabbling in Biotechnology as well. Currently, Biotechnology (XBI) and Pharmaceuticals (XPH) are both on a nice bull run, while Akorn is outperforming both greater sub-industries.

AKRX features an up-trending pattern in the long-term, intermediate-term, and short-term. Basically, no matter how you slice it, the stock has been extremely solid over the past few years. While there have been brief consolidation periods to begin 2013 and 2014, the stock has otherwise been on a sterling up-trend with explosive returns.

Turning to this year

After basing in April, Akorn has been on a tear from the $22 area up to prices north of $39 to begin September (up 77 percent in 6 months). The stock has not developed a dangerous parabolic pattern despite it's heavy gains, and continues to display short consolidation and pull-backs that have been great buying opportunities recently.

Akorn has remained above its 50-day moving average since the April base, which is also a very bullish sign. After hitting opening highs of $39.25 on September 3rd, Akorn has pulled back to the 50-day moving average, where it seems to be basing. With some short-term support just below in the $35.30 area, it appears the pull-back is about done.

Akorn does not report earnings until early November, and is relatively quiet among headlines recently, so it appears there are few deterrents, news-wise at least, that would keep the stock from continuing its impressive march higher.

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The current pull-back is a chance to catch Akorn at a decent entry price for a short-term swing trade. A run back to $39.25 from current prices would produce a gain of +8.63 percent, making the upside here considerable given the time-frame (1-2 week hold). The potential downside with a stop at support ($35.34) would be just -2.24 percent, which gives this set-up a very high reward to risk ratio.

Entry Method:

Buy at the current price (~$36.15).

Exit Method:

Sell at a close below $35.34 (Breakdown) / An intraday price of $39.25 or above (Profit-Taking)

Company Profile:

Akorn, Inc. (Akom) is a manufacturer and markets a full line of diagnostic and therapeutic ophthalmic pharmaceuticals, as well as niche hospital drugs and injectable pharmaceuticals. In addition, through its subsidiary Advanced Vision Research, Inc. (AVR), it manufactures and markets a line of over-the-counter (OTC) ophthalmic products for the treatment of dry eye under the TheraTears brand name, as well as a portfolio of private label OTC ophthalmic products. The Company operates in three segments: ophthalmic; hospital drugs & injectables; and contract services. In April 2014, the Company acquired Hi-Tech Pharmacal Co., Inc. In June 2014, the Company sold its subsidiary, ECR Pharmaceuticals (ECR) to Valeant Pharmaceuticals International, Inc. In August 2014, Akorn Inc. acquired VPI Holdings Corp. Effective August 12, 2014, Akorn Inc acquired VersaPharm Inc (VersaPharm).

Stock Rating:

The Stock Rating indicates the combined score of our proprietary Earning Strength and Company Performance models. The rating scale is 0 - 10 with 10 being the highest.

Disclosure:

At the time of publication the editor and affiliated companies own the following positions: None

Note: Positions may be bought or sold while this publication is in circulation without notice.

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