Cassava Sciences stock price outlook is bearish despite insider buy

Cassava Sciences (NASDAQ: SAVA) stock price has been in a steep sell-off in the past few months as the enthusiasm of its pipeline wanes. Shares of the biopharmaceutical company were trading at $24.9 on Wednesday, ~51% below the highest level in 2022.

SAVA Insiders are buying

Cassava Sciences stock rose by ~7% in extended hours after one of the company’s directors bought shares. Public disclosures showed that Richard Barry bought 11,655 shares worth $302,193. He now holds 197,724 shares in the company. In all, insider transactions show that other directors like James Kupiec, Eric Schoen, and Sanford Robertson have bught shares in the past 12 months.

Insider transactions are seen as the best barometer on whether to invest in a company or not. That’s because these insiders tend to have deeper knowledge about a company and its prospects. The opposite is also true. 

For example, we saw Tesla stock plunge as Elon Musk sold shares worth billions of dollars. Also, Carvana insiders were aggressively selling the stock before it collapsed in 2022. Therefore, there is a likelihood that Richard Berry believes that the company’s tests will go on well.

For starters, Cassava Sciences is a company that is developing drugs to deal with illnesses like Alzheimer’s that affect millions of people internationally. Other pharmaceutical companies, including Biogen and Eli Lilly are all developing drugs to deal with the illness. 

The most recent news is that Eli Lilly’s Solanezumab failed to prevent the disease from happening. Biogen’s controversial drug has also not gained traction because of its cost and the fact that it had challenges with efficiency. The FDA is set to start reviewing a drug developed by Japan’s Eisai.

A key challenge for Cassava Sciences stock is that short-sellers have always surrounded the company. It has a short interest of ~27%. Some of the best-known funds that are short the stock are Jane Street, Susquehanna, Wolverine Trading, and Citadel Advisors among others. 

Cassava Sciences stock price forecast

SAVA stock chart by TradingView

The daily chart shows that the SAVA stock price has been in a strong bearish trend in the past few months. It has crossed the key support level at $26.55, the lowest level on January 3. Most importantly, the shares crashed below the 50-day moving average on January 25 while the Relative Strength Index (RSI) has moved below the neutral point at 50.

Therefore, it seems like bears are now in control, which will see the shares plunge to the next key support at $20. The stop-loss of this trade will be at $29, which is the 50-day moving average.