Fundamentals and Technicals Continue to Support QCOR

Shares of Questcor Pharmaceuticals (NASDAQ:QCOR), despite a large short interest, have continued to perform well for shareholders and broke through several resistance levels this week to eclipse the $30 level on Wednesday. We noted at the beginning of December that shares could trade into the $30 range by year’s-end, and investors are demonstrating that same confidence in QCOR. Two recent updates from the company – an accelerated dividend and expanding sales force, which is anticipated to grow by 30% – support our thesis that Acthar sales continue to grow and demonstrate management’s confidence in the product’s growth potential. We also noted in our last article that the QCOR short thesis has largely played out, as evidenced by the stock’s quick rebound after a negative report in early December. Even flat growth for Acthar from levels in 3Q justifies a higher valuation for QCOR, and we’ve stated that based on fundamentals alone, the stock could move to the high-$30 or low-$40 range.

Technicals in the near-term support a move higher as well, suggesting that investors should stay the course. With QCOR’s recent break through of the $29.60 and $30.13 levels, the stock has room to run 10% up to $33.00, its next level of resistance. And with a run up through the $33.00 level, the 200-day SMA is the next level of resistance at $37.11. $35 would also represent a 50% retracement from the November 7, 2012 highs and the November 27 lows, indicating another level of resistance. Nevertheless, it looks as though the stock is going to take a run at the mid-$30 level, with shorts likely to cover positions as the year closes.