MannKind Not Necessarily Gearing Up for a Speculation Run

May.24.11 | About: MannKind Corporation (MNKD)

By Relmor Demitrius

MannKind Corporation (NASDAQ:MNKD) recently received news from the FDA outlining exactly what they need in the new trials to achieve approval for Afrezza. As the drug itself and how it is ingested has already been considered safe by the FDA, the delivery system and more trials for type 1 and type 2 approval will be necessary and will being very soon and end in late 2012. With MannKind's money running out in early 2012 per their CFO, there is going to be speculation about receiving a partnership or additional financing in the coming months.

Did MannKind bottom this year around $3.40 because of the now clear path to approval? Do investors expect a partnership or enough money to see the project through to its end soon? Are investors betting on Al Mann being successful in getting another product to market? Since my strength is technical analysis, let's see what looking at the chart can tell us.

The first thing that catches my eye is on the volume study. Volume had been low and flat since prior to 2009. Volume used to be around 6 million shares trades a month. For the last year or so the average monthly volume is around 35 million shares. That is six times the volume from prior to the first speculation run on approval. Probably it's like three years of slow accumulation, then they may have sold on those runs to $10 a share or higher. Now volume is extremely high versus historical data and this stock has entered trading mode, as I like to call it.

The stock is now in super sensitive mode with good or bad news able to drive the price hard in one direction or the other. Based on the low volume break circled from 2009 on my horizontal support/resistance line, this time on heavy volume it did not break. This is very bullish to me. Even on heavy selling, above that line there was heavy support as well, whereas in 2009, the price was allowed to drop on low volume, meaning buyers weren't there at any price. Now they seem too available, which bodes well should good news hit.

The beta of this stock should increase now going forward, attracting the trader mentality. Investors should be cautioned by these aggressive daily/weekly swings and try to focus on the big picture. When traders appear, the market maker games intensify and stockholders can be left being sacrificed. I mean by this is that a stockholder might find a long-time support price broken, not for him to sell, but so a trader can exit. If you join this trader in selling, you may find the price right back to where it was before the dangerous support test. Same can be said for breaking resistances. Buying on a breakout can trap you just as easily. You may think the stock is "finally" breaking out, meaning news must have leaked, only to find that the break was for traders to buy in high. Try not to get sucked into either of these scenarios. Know that real news will come and invest according to how you think this will play out. Try to ignore the noise and hopefully how you "invested" in the company will pay off down the road.