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Healthcare

Arena Pharmaceuticals (ARNA) : A Review of My Trade

On Sept 17, Arena Pharmaceuticals’ management announced that they are going to post the results of the Phase 3 data for its drug on Sept 18 (the following day).

After trading hours, the price shot up to 6.58

However, price in the after trading hours are not really reflective of the actual price. ARNA opens at 4.9 on Sept 18 and it dive down to as low as 4.39

But, the surprised move comes around mid day when a sudden surge of volume push it back 5.20 , 5.30 range. Volume was extremely high that day. It was around 76M vs a 2M (average volume) at around mid-day.

It was hard for me to figure if it is the greatest pump and dump operation or not.

Cos’, on one hand, the lows of 4.39 will have signify that the uptrend was broken. But, yet, within hours, it has rally back as much as 13% to 15% and is back into the ‘uptrend’ range.

With such uncertainty, it is best to just take my profit and watch from the sidelines.

As of Sept 21, ARNA is still trading within the triangle pattern. It is still not clear if the price will break up above the resistance or if it will just break down like Sept 18 upon results.

Thinking out loud.

1. What causes the sudden drop in price on opening when the results is out?

2. What causes the rally hours later? How is the news different compared to just a few ours earlier?

3. I do not have answers to the above? From the chart, I can only say that the opening price breaks all my support level, including the kumo support on the Ichimoku chart as well as the trendline.

I am not taking my chances for now and is standing by the sideline to watch the price action. When it becomes clearer, I may take a position again.

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