Full disclosure, I’ve had a small portfolio of “magic mushroom” stocks for a few years now, so I take an interest in these headlines. That said, you’re going to want to follow my lead here.
This is how things will play out in this industry…
First, Big Pharma will start taking small positions in these tiny startup “psychedelic” companies. They’ll read the writing on the wall, as positive results from Phase III clinical trials for the treatment depression roll in.
I call this the “foot in the door.”
Next, the FDA will start approving psychedelic therapies. The agency issued its first draft guidance on clinical trials using psychedelic drugs in June 2023. Sidenote: When that happened, the stock we’re looking at today shot 75% higher in a month. That was just a test, and there’s more to come.
Finally, after those approvals start, Big Pharma will step in to buy as many “assets” in the space to ensure that this new age treatment doesn’t bury their “old school” patented and exclusive drugs.
I’m not the only one that’s reading this playbook.
In September, it was reported that Ken Griffin’s Citadel Advisors – the fifth largest hedge fund in the World – had initiated a position in Compass Pathways (CMPS). The firm was joined by more than 25 other institutions in buying more than 14 million shares of the psychedelic healthcare company.
This week, Citadel reported that their position had been increased to represent 4.9% of the company.
They’ve got their foot in the door, and it’s a great time for you to do the same.
Compass Pathways just announced positive results from a phase II trial. Shares ripped 10% higher yesterday, but there’s an even larger move coming as the stock crosses a psychological trigger price.
Bottom Line
Trading at $9.77, CMPS shares are only 2.3% away from crossing above $10. Historically, stocks that cross that price see an increase in volume and prices as investors love seeing a stock emerge from single-digit prices. I know, it seems too simple… but it’s true.
In September, the stock got firmly rejected at $10 on the button before dropping to $5 (to the penny).
We’re going to see more institutions put their foot in the door on CMPS as it cracks above $10. My initial target is $12 over the next two months, but as I suggested… I’m in this for the long run with my eyes set on a $20 target in 2024.
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About the Author
Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.