It Was a Good Run for Cell Therapeutics, But... (CTIC)

Like it or not, all good things must come to an end.... even for a red hot stock like Cell Therapeutics Inc. (NASDAQ:CTIC). Yes, CTIC is up 111% since the end of 2013, up 14% today alone, and it doesn't look like the bulls have any reason to slow down now. That's exactly why now's the time for current shareholders to be afraid, however - expect it when you least expect it.

If the name Cell Therapeutics Inc. rings a bell, there may be a couple of reasons for it. One of those reasons is that the stock has been run through the wringer over the past several years, mostly because of a drug called Paxinatrone, for non-Hodgkins lymphoma. Though the FDA's rejection has kept CTIC at bay for years now (long story, best left untold for now), what's not been appreciated is that Pixantrone has not only been approved in Europe, but has been getting a little sales traction there.

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The other reason CTIC may seem familiar is that yours truly here made a point of calling it a bullish idea way back in September, when the stock was valued at $1.37 per share. Although most traders didn't see it (or didn't care) at the time, what they would have seen with a closer look at the chart of Cell Therapeutics at the time was a slow, gradual (read "sustainable") U-shaped reversal that had just carried the stock above the 200-day moving average line after a disastrous pullback in 2012.

Well, I hate to be the one to say I told you so, but, I told you so. CTIC has rallied from $1.37 then to $4.02 now, and even reached a high of $4.25 today. That's a 193% runup, which isn't bad for four months of work.

I don't come here to gloat about Cell Therapeutics Inc. though. I come here to let you know the rally I fell in love with in September looks like it just flamed out today.

There are a handful of specific clues leading me to that conclusion. One of them is the fact that CTIC has left behind five bullish gaps over the course of this rally, the most recent of which materialized today. That's a lot. The rule of thumb is three unfilled gaps are allowed to materialize before the pullback potential has to take hold. With five on the table, a dip is practically inevitable, soon.

Another reason now would be a great time to let go of Cell Therapeutics: The shape of today's bar. Already strained thanks to the weight of its recent gains, the open and current price of CTIC (it's already fallen to a new low of $3.91 during the time it's taken to write the past three paragraphs) suggests today's peak of $4.25 marked the transition point between a net-buying environment to a net-selling environment. With the scales tipped in the other direction now - with lots of room to fall - the same rush to get in likely means all those buyers will be in a similar rush to get out.

Bottom line? Today looks like a pivot point. If you got into CTIC on my advice in September, I now recommend getting out.

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