A couple of weeks ago I penned some less-than-bullish (and relatively unpopular) thoughts on Arena Pharmaceuticals, Inc. (NASDAQ:ARNA). It was nothing personal, and really nothing fundamental - I just didn't like the way ARNA shares were taking shape. In other words, the way the chart was forming suggested a bigger pullback was brewing.
I was right too... for one whole day. My pessimism on the 18th preceded a 4.8% dip from ARNA shares, which carried the stock to new multi-week lows. By the next day though, Arena Pharmaceuticals began to rally back, and wouldn't stop before the clawed their way back from a close of $7.50 on the 19th to a close of $8.53 by the 25th.
Most bears would have given up by that point, but I didn't; I still saw the chart as a troubled one, and looking for a way to keep sinking.
One of the reasons I remained pessimistic on Arena Pharmaceuticals, Inc. is that the ceiling at $8.68 was never broken. Another reason I didn't feel the bulls were serious about a rebound was that the volume on the way up then wasn't all that strong. [It was a little better, but never great.] And sure enough, ARNA turned right around and moved back under key short-term moving averages.
The worst part about all that action: The stock blew its best chance at a major recovery.
To give credit where it's due, the bulls still have a fighting chance here. As long as Arena Pharmaceuticals shares don't move under the recently-developed support at $8.10, the stock hasn't passed the proverbial point of no return. Thing is, the bears are really bearing down here.... repeatedly.
Just for the record, I have no personal beef with the company. As a matter fact I'm actually a tad sympathetic to its plight with the DEA. Its weight-loss drug Belviq has been classified as a controlled substance by the nation's Drug Enforcement Agency, which has meant Arena has been forced to jump through hoops despite the drug being approved in the middle of last year. Indeed, the wait (on the DEA) has become a little insulting at this point. Then again, I'm not an activist - I'm an opportunist, and if the stock suggests it's on the verge of a major meltdown, then I'm not interested in going down with a sinking ship.
The good news is, I still see any pullback under $8.10 as a temporary dip, even if a painful one. You can use that as an opportunity to step into what should be a compelling rebound play once the brewing selloff has fully played out.
No, this isn't 'investing'. It's 'trading'. But, if you've chosen to dance with ARNA, then that's what you've chosen to do.
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