Math Over Myth: Compass and Revive Release Phase 3 Updates but Stocks Drop

Math Over Myth strives to help retail investors avoid getting bled in a dead red market. Corporate press releases often offer inspired empty promises for a benevolent and prosperous future, but as sure as the high card rules the realm in a game of seven card stud, so it goes with price action in the Crazy Capitalist Casino.

Before placing bets on a rising tide in the stock market, one must first determine where the price floor or bottom actually exists. Last week we focused on psychedelic stocks making bottoms in Q3. Today we check in on two of those stocks that announced Phase 3 trial news last week, Compass and Revive, to see if their respective narratives match the charts.

COMPASS Pathways (Nasdaq: CMPS)

Cathie Wood’s ARKG ETF bought over 205K shares of CMPS last week in a $2.7M+ transaction. Moreover, CMPS announced their Phase 3 Pivotal Program Design For COMP360 Psilocybin in treatment resistant depression.

CMPS confirmed a bottom of approximately $10.50/share, which first occurred in Q1 2022 (March), twice during Q3 and once in early October. However, CMPS was unable to defend its support level last Thursday despite these catalysts.

Sustaining price action below $10, CMPS closed out the week at $9.31/share with its moving averages upside down and ugly. I warned that a sustained breach can potentially drag CMPS down to price consolidation levels of about $9, $7.53, and then $6.54. This week’s price action will demonstrate whether the $10 support level can be reclaimed by the bulls, or if the bears can successfully flip $10 from old support into new resistance.

Perhaps the lack of demand for CMPS stock is presently related to CMPS CEO George Goldsmith telling Business Insider he doesn’t expect psilocybin-based treatments until 2025 while running a company with a roughly $1.2B market valuation. Psychedelic Alpha further noted, on Twitter, that due to the timeline of both of CMPS’s Phase 3 trials, any potential approval of their psilocybin product COMP360 will not take place until at least 2026.

In 2020 and 2021, CMPS spent almost $67.4M total on R&D. However, their General and Administrative (G&A) spend over the same period also exceeded $67M. That’s quite the outsized earmark going to executives of a company whose stock was in a free fall, erasing shareholder value for those who bought the IPO, while company insiders (owning roughly 33% of CMPS) made a handsome profit on IPO day. CMPS’s G&A spend from 2020 through 2021 even eclipses the company’s 2022 revenue expectations of $51M. Despite my focus on technical analysis, this fundamental imbalance is concerning and raises serious red flags.

Revive Therapeutics (OTC: RVVTF, CNSX: RVV)

RVVTF confirmed a bottom of approximately $0.12/share this year and first occurred as a significant level of price consolidation all the way back in June 2018. In 2022 $0.12 first emerged as price support in Q1 (early April) and once again at the end of Q3. Since October, RVVTF successfully tested this support level already, bouncing above another critical price level of $0.16.

Last Friday in the middle of the trading session RVVTF announced finalization of their amended Phase 3 COVID-19 study protocol to the FDA. However, the stock sold off on heavier than average volume to close the day down 6%. But RVVTF found short term price support at about $0.20 these past two weeks and closed last Friday at $0.2182/share. A successful defense of $0.20 or $0.16 will further signal strength of the bottom. On the other hand, a sustained breach below $0.12 can potentially drag RVVTF down to about $0.67, then $0.0173.

Conclusions

Investors often buy rumors and sell news, meaning that expectations are already priced in by the time an announcement is released. When Canada legalized recreational cannabis in October 2018, the entire sector promptly sold off with the same vigor that caused its pre-legalization rally. Moreover, professional traders are focused almost entirely on technicals. Don’t give the pros the competitive advantage in the marketplace by tripping over corporate mythology. Focus on the charts, price action, and provable analytics to develop a strategy that meets your time horizons and mitigates risk.

Craig D. Schlesinger is a professional gambler and market analyst with over twenty years experience predicting price movements and trend reversals in various economic sectors. Over the last two years, Craig established himself as a top trusted authority on psychedelic equities. Follow his technical analysis on Twitter: @mathovermyth.

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Craig holds no positions in CMPS or RVVTF