While it may seem counterintuitive to suggest selling a stock that's rallied 34% in just three days (including today's 5% jump), but that's exactly what I'm suggesting you do with MannKind Corporation (NASDAQ:MNKD) right now. And, for those of you who've been following the MNKD saga for the past couple of years and know the product it's working on - AFREZZA - well enough to know it's got some potential, the sell call is even more surprising. But, it is what it is.
Just for the record, this isn't a judgment call on MannKind Corporation. The company is fine, and perhaps even better than the average young biotech. But, the reason for the recent romp from the stock was a wobbly one, and won't likely last.
If you take a closer look at exactly when MNKD started to soar, you'll see it was around the same that not one but two enthusiastic commentaries were posted that focused on the stock. One was a press release from Five Star Equities that made mention of the Food and Drug Administration's new 'breakthrough' designation, which is designed to speed up the approval process for desperately needed treatments. The Marketwire press release - posted on March 8th - was ultimately intended to point out the fact that research about Mannkind was available at that website, but to also offer that analysis with through that 'breakthrough' lens.
The other bullish commentary posted on the 7th was a piece published at Seeking Alpha... 5 Reasons MannKind Could Be The Best Performing Stock Of 2013. Author Joe Springer makes a well-reasoned case in support of MNKD.
On the surface it's all compelling. There's more to the story though.
Though Springer's thesis is right and amazingly-complete, the title of the commentary is strong, and a little hyperbolic. Traders may respond in knee-jerk fashion to the write-up (and they did), but those same buyers can - and often do - unwind their positions just as quickly. As for the Five Star Equities press release, though nothing in the news release was table-pounding in favor of MannKind Corporation, the very fact that the company was linked with the FDA's new drug-development designation could have been encouraging. Problem: AFREZZA isn't one of the drugs that's been given the FDA's 'breakthrough' status, leaving one to wonder exactly why Five Star Equities mentioned it along with the fact that it's offering research on Mannkind.
All of that being said, if nothing else, MNKD is a sell today if only because of the shape of its chart. Today's bar shows a strong downside reversal effort, with a bullish gap at the open, a little more upside after that, and then a very quick pullback to the lows of the day. It suggest the market is starting to figure out that last week's enthusiastic comments didn't really unveil anything new.