You’ve undoubtedly heard the phrase “buy the rumor, sell the news”, right? Well this week we could see that old adage play out and this time you should be on the right side of it. On October 12 I laid out the reasoning for a possible rally in the stocks related to stem cell research. My case was that there was growing talk that the Democrats were gaining momentum. The stem cell debate is one that touches off a lot of emotion, especially for our President who has used his veto power only once and it was to block the governmental funding of stem cell research. This veto was a kick in the nuts for stem cell companies and if Democrats can gain control there is a growing HOPE that there would be enough votes for an overturn of a future veto. The trade I pointed out was based on the “perception of potential change” in the political landscape. On Tuesday we will learn whether that perception becomes reality as votes are tallied.

The “stem cell story” has gained a lot of momentum in the popular press this past week and that makes me think it is getting close to the time to get out of the trade. If these stocks experience sharp runups Monday and Tuesday I would suggest taking profits. SUCCESSFUL TRADERS ANTICIPATE, THE PUBLIC REACTS TO “NEWS”.

I am long GERN and ASTM.