Zynerba Pharmaceuticals, Inc. [NASDAQ: ZYNE] was one of the big gainers in Tuesday’s trading. The stock closed the day at $13.50, up by about 16%. This followed news that it had received a patent for its synthetic cannabidiol that will be used in the treatment of autism spectrum disorders. This announcement saw the stock surge by over 18% before the final close at $13.50, and from a look at the daily chart, ZYNE still looks bullish short term.
That’s because, after yesterday’s huge rally, and a slight correction to $13.02, the stock entered a consolidation phase, ranging between $13.35 and $13.95. Considering the weight of the patent news, this could be a bullish continuation pattern, with the possibility of an upside break when the markets open. Bullish sentiment is also confirmed on the monthly charts, where ZYNE is perhaps in the early stage of a bull trend, with the 50-day MA offering key support at $11.10.
Tuesday’s patent news are weighty, and bullish for two reasons. First, CBD oils as a form of treatment have been gaining traction in the market over the past few years. This means that a product linked to CBD and with the capability to treat autism is likely to be received well by the market. In essence with this recent news, ZYNE is likely to experience a significant increase in demand and perhaps the revenues will rapidly grow moving forward. Secondly, with this patent in place, ZYNE can potentially wade off the competition in the CBD autism treatment market. This is another factor that could help drive up this company’s sales in the long run. That’s because, Cannabis based companies have made major moves and shifts in the market over the last few years. In such a market, patents alongside quality products are the key to differentiation and long-term value growth.
Looking at the company’s books, an increase in sales due to this patent would significantly impact on its numbers, especially the profit margins and the return on equity. At this point, the company is in the negative on all these areas. For instance, it’s income is at -36.80 million and its EPS is -2.27.
Other than these negative numbers and the fact that the company is still losing money, the stock technically is in a nice chart set-up for a potential move in the short term. This potential is now much higher now that ZYNE has this patent.