Fulcrum Therapeutics: A Short Squeeze and a Gap Fill

 Fulcrum Therapeutics, Inc. (FULC) makes an excellent short squeeze and gap fill candidate. It shot up 39% on Tuesday after the FDA ended a clinical hold on its sickle-cell disease candidate FTX-6058. The stock dropped from $12.89 to $5.66 on February 24th after the FDA placed the hold on it, so it would make sense that the stock reverses most of those losses now that the hold has ended. 

Right before the hold, the company raised $125 million at $13 per share. That left the company with about $280 million in cash and marketable securities on its books with marginal liabilities, or about $4.50 in cash per share. Even with the hold being lifted, it's trading at just above its cash value. So it has fundamental value as well as being a good technical trade.

Here is where things get interesting. The stock has topped out at around $6.40 over the past couple of days. On February 24th - the day it dropped from $12.89 close on the previous day - it hit a high of $6.49. Above that level there is a massive gap to fill. Shorts are very interested in capping the stock at the $6.40 level to make sure it doesn't happen. Right now there are about 3.5 million shares short, leading to a 7% short interest. Not very high, but significant enough where it can cause a squeeze especially after the news and recent move up in price. 

We see that the chart looks bullish as it has broken out above all of its moving averages. Any pullback on FULC should be seen as a buying opportunity as the stock has had legitimately good news that reversed the prior bad news, is strong fundamentally with a lot of cash, raised money at $13.00 so institutional investors have an incentive to see it get back to that level after this reversal of fortunes and there is a major gap to fill.