(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)

Nektar Therapeutics' (NKTR) stock has plunged from its recent highs by nearly 25% over the past few weeks. Shares of the $13.8 billion biotech company could be heading even lower, by perhaps as much as 15% more based on technical analysis. The stock has come under increasing pressure since Bristol Myers reported data for its own cancer drug that failed to impress investors when compared to competitor Merck's Keytruda. Nektar and Bristol Myers are in a collaboration agreement in the development of Nekar's immuno-oncology drug NKTR-214.

Nektar was one of the hottest stocks over the past year, with shares rising by nearly 350%, but they are down sharply since shares peaked in mid-March. A March 6 Investopedia article noted that shares of the stock appeared to be topping out and were set to fall as the technical chart started showing signs of weakening. (See also: Biotech Stock Nektar May Be Ripe for a Sharp Pullback.)

15% Drop

The chart below shows a stock that is now in a clear downtrend and appears to be heading lower, by about 15% to $70. Shares are currently resting on a mild support level around $82.25. Should that level break, the stock will fall to the next support level at $70. The stock broke a significant uptrend back in the middle of April, and that also serves as a bearish indication for the shares. 

 

Weak Relative Strength

Additionally, the chart shows the relative strength index (RSI) is continuing to trend lower and has yet to hit oversold conditions. The current reading is at 35 and would need to fall below 30 to indicate the stock is oversold. In fact, the RSI is still trending lower and has yet to show an indication of shares bottoming, suggesting there is more room for the stock to fall. 

Results Near

The company is expected to report results on May 10 after the close of trading; analysts are looking for revenue in the first quarter to grow by 64% to $40.59 million while forecasting a net loss of $0.50 per shares versus a loss of $0.42 a year. The company is set to receive a $1 billion upfront payment from its collaboration with Bristol Myers, announced in February, which should give the company plenty of cash in which to operate, despite the widening loss from last year. 

For now, the trends suggest there is more reason for shares of Nektar to continue falling, but in the hot immuno-oncology space, a new collaboration or positive data could quickly send shares soaring once again. 

Michael Kramer is the founder of Mott Capital Management LLC, a registered investment adviser, and the founder of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of two to three years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.Upon request, the advisor will provide a list of all recommendation made during the past twelve months. Past performance is not indicative of future performance.

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