Hemispherx BioPharma, Inc. (AMEX:HEB) shares form a classical technical chart pattern in front of a potential FDA approval of Ampligen.
Owning Hemispherx BioPharma, Inc. (AMEX:HEB) has got to be excruciating at this point, not to mention a little worrisome if you're watching its chart. The pending FDA approval of Ampligen as a chronic fatigue syndrome treatment has been delayed twice now, which has given traders enough time to start second-guessing themselves. As a result, this penny stock is starting to toy with a breakdown.
The original FDA decision was supposed to come in February, but due to staffing shortages, the FDA pushed the date back to late May. A day after the administration was supposed to make the May announcement on Ampligen - an approval or rejection - they again asked for a little more time.... one to two weeks.
If you check your calendar, you can see it's been more than one to two weeks since the last delay.
Now the latest speculation is that it could happen sometime next week, which is actually a decent bet since the appropriate committees (vaccines) are indeed going to meet then. That doesn't mean they'll make a decision about Ampligen, but it at least raises the odds.
In the meantime, the ongoing delays have let this penny stock slip into a very troubling triangle pattern; the support side right at $2.00 looks like it's ready to implode. If it does, Hemispherx may not find a floor again until $1.10 at best, or 50 cents at worst. Both are prior support levels.
This is a near-textbook example of a wedge/triangle breakdown.
So what's the real deal here? I think this is mostly a case where nerves had enough time to grow cold. Every day that passes with no word from the FDA gives investors more time to start rethinking their decision (and a non-decision by the FDA doesn't exactly bode well either).
On the flip side, the support at $2.00 is still hanging strong, even if the stock is cutting it very close.
If for some reason Hemispherx's Ampligen is not approved, I can definitely see a meltdown. The best way to trade is probably the obvious one... use a trade trigger of any move under, say $1.95 or so. The big risk with that strategy is that HEB could plunge so fast, you may enter at a terrible price. To combat that, maybe you should also set a limit/contingent order.
Bullishly, a simple break above the falling resistance line of this wedge (not shown) should be a great breakout signal
No matter what, I'm expecting to see trading fireworks from Hemispherx real soon.
If you'd like to receive any future commentary or trading alerts on Hemispherx BioPharma (HEB) be sure to sign-up for our FREE newsletter here: http://www.smallcapnetwork.com/t.