Cassava Sciences Stock Soars In Anticipation Of Alzheimer's Data: A Technical Analysis

On Thursday, Cassava Sciences, Inc SAVA smashed through a resistance level at $117.54, made 21 years ago between its initial public offering date of June 14, 2000 and December of that year.

On Wednesday, the biopharmaceutical company announced it will present new clinical-trial data from a Phase 2 trial of its drug simufilam at the Alzheimer's Association International Conference (AAIC) on July 29.

Cassava Sciences’ stock shot up over 24% following the news as traders and investors became encouraged the company would prove further efficacy of simufilam at the AAIC.

On Thursday, the stock continued higher and pushed through another resistance level at $125.

More than 6 million Americans are living with Alzheimer's, an irreversible and progressive brain disorder that in late stages can be fatal.

Biogen Inc’s BIIB controversial Alzheimer's therapy Aduhelm  was approved by the Food and Drug Administration on June 7.

The FDA is now calling for a federal investigation over interactions between U.S. officials and Biogen staff prior to the drug's approval.

The Cassava Sciences Chart: This week, Cassava Science’s stock has climbed over 74% since Monday’s market open and has become extended from the moving averages on larger timeframes.

Cassava has an extremely small float of just 37.43 million shares, with over 10% of its shares held short, which indicates Cassava Science’s could skyrocket much further. Being extended may not matter much to traders who are looking to play momentum.

As the stock is now trading at a price it hasn’t seen since 2000, there are likely few investors still holding from higher levels. This means the majority of traders in the stock are up on their investment and, until they sell, there will be little bearish volume. The small float also means, however, that when traders do begin to sell shares, the stock can drop quickly.

Cassava Sciences is trading about 25% and 38% above the eight-day and 21-day exponential moving averages (EMAs), respectively, with the eight-day EMA trending above the 21-day EMA. Although this is technically considered extended, it’s also a bullish indicator. Cassava Sciences is also trading well above the 200-day simple moving average, which indicates overall sentiment in the stock is bullish.

Bulls want to see continued momentum push the stock price higher. There may be resistance above at $127, $136 and $160 before reaching its all-time high of $184.57. Bulls will want to watch for large bearish volume on smaller timeframes for an exit.

Bears will have to wait for a large number of traders to exit their position. Because there is a known news event next week, it could be a ‘sell-the-news' event.

SAVA Price Action: Cassava Sciences was trading 8.6% higher at $127.71 at last check Thursday.