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It was just last week that things began to look more promising for Arena (ARNA). The equity made a move up and with a launch of Belviq imminent it appeared that the worst was behind us (at least until the initial sales numbers arrived). That was then, and yet another week has passed with no real indication of a launch date for the anti-obesity drug Belviq.

Monday morning Arena dipped below $8.00 per share. This is not good news for longs, as that was a critical support level for the equity. The next real support is all the way down at about $7.25. What can stop the slide? That answer is simple. Belviq needs to launch. That will stop a slide and stabilize the equity until such time that the street can get a look at initial sales results either through channel checks or from the company itself.

The key issue here is uncertainty. We are uncertain about a launch date, uncertain about the size of the prescription anti-obesity market, and uncertain as to what level of success Arena and Belviq will have in this space vs. the numbers we are seeing from Vivus (VVUS) and its anti-obesity drug Qsymia. Uncertainty begets fear. Fear begets a sliding stock price.

Whether you believe that Belviq will sell strongly or not is likely a key determining factor as to whether you hold long and strong or sell and move on. Personally I still hold my position and will not be a seller unless the equity dips below $7.25. The active traders are the ones in control now. Absent any concrete data to work with the equity has little reason to surge from current levels. The longer the DEA takes, the more that uncertainty builds.

If you were anticipating a surge on the launch, you may still get one, but at this point, having already given up quite a bit in stock price, it may be a surge to $8.50 rather than a surge that starts at $8.50. For longs that is perhaps not quite what was hoped for.

The trend right now is a pattern of a couple of steps forward followed by three steps backward. We have an equity that gains 10 cents one day, but gives up 15 cents another. There is pressure on this equity to get some performance and data out there. Even if it only appears that sales will be "decent" it will allow analysts and investors to establish better valuations and expectations.

The bottom line is that we need to see the DEA deliver the final scheduling and Belviq get onto the market so that at least one aspect of the uncertainty can garner resolution. If you are long this equity you were not likely expecting to visit the $7s again. If that is the case, develop your action plan (adding to your position, selling, or holding) now. If you are short you need to have your plan in place as well. For the short side the $7.25 level would be welcomed news, but uncertainty impacts shorts as much as it does longs. We could see battle lines drawn at current levels with a launch date being the factor that determines ultimate winner in the battle for $8.00. Stay tuned.

Source: Arena Dips Below $8 - Uncertainty Is Key

Additional disclosure: I have no position in Vivus.