The best and worst performing shares this week
With the FDA recently accepting Mesoblast's (ASX: MSB) Biologics License Application, which is good news, a significant bump in the share price might be on the horizon.
So, is now the moment to take a punt on the prospect of a positive outcome, or could regulatory scrutiny push this company towards penny stock status, given the critical importance of FDA decisions?
In the biotechnology and pharmaceutical industries, few events are as eagerly awaited as an FDA approval and understanding the impact of such approvals is crucial when deciding whether to invest.
Securing FDA approval signifies a strong endorsement of a product's safety and efficacy. For Mesoblast, this acceptance means their product is one step closer to market entry, where it can begin generating revenue.
The exciting prospect for investors is the potential for the share price to surge following approval. This was evident with Clinuvel Pharmaceuticals (ASX: CUV), which recently received FDA approval, causing its share price to soar by 60% the next day.
Mesoblast's stock has been experiencing one of its most bullish runs in recent history, rising more than 400% since January this year.
The positive sentiment around Mesoblast is evident, with buyers betting on a favourable FDA outcome. What's even more exciting is that at current levels, near $1, the share price remains well below its all-time high of $9.
However, it's important to recognise that the recent surge is driven by speculation, as no FDA decision has been made yet. Potential investors should be prepared for volatility and the possibility of a dramatic drop in the share price if FDA approval is not granted.
Regardless, if the share price can continue to trade higher and break above the July 23 high, this will signify a major milestone and provide a high degree of probability that it will trade much higher in the medium to long term.
The broader Healthcare Sector, which has recently displayed strength, provides a supportive environment for Mesoblast.
Therefore, I would encourage investors to monitor the share price closely for clues about Mesoblast's next move before the important FDA decision.
What are the best and worst-performing sectors this week?
The best-performing sectors include Real Estate, up more than 2%, followed by Consumer Staples and Financials, which are both up more than 1.%.
The worst-performing sectors include Information Technology, down more than 1%, followed by Materials, down more than half a per cent, and Energy, slightly up under half a per cent.
The best-performing stocks in the ASX top 100 include James Hardie Industries, up more than 10%, followed by Reliance Worldwide Corporation, up more than 9%, and Block Inc, up more than 7%.
The worst-performing stocks include Domino's Pizza and Paladin Energy, which are both down more than 8%, followed by NEXTDC Limited, down more than 4%.
What's next for the Australian stock market?
The sellers finally stepped in this week to push the All Ordinaries Index down by more than 1%.
I say "finally" because markets don't climb indefinitely without resistance from sellers, and it's been almost four weeks since we have seen some meaningful selling on our market. The importance of this should not be underestimated, as it provides the ability to judge the market's next move more decisively.
We already know how strong the buyers were in July, so it's time for the sellers to show what they are made of.
So far, they have only managed to push prices down by half of what buyers achieved in July, which is a telling sign. If one party can exert half the effort of the other, what does that indicate about what's to come next?
If the buyers step in next week, I expect a break to a new all-time high in the coming weeks.
If selling continues, I anticipate prices could drop to as low as 8000 points. If this happens, it could provide a rare second opportunity in July to buy stocks at discounted prices.
This is why I always emphasise that patience and preparation are the keys to successful trading.
Knowing that markets and stocks provide multiple opportunities and being patient enough to wait and seize those moments is what separates professionals from the rest.
Therefore, with the potential for new opportunities on the horizon, make sure you are prepared to capitalise on what the market offers next.
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