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Arena Pharmaceuticals, Inc. Message Board

  • guido_arnone guido_arnone Sep 24, 2009 12:33 AM Flag

    Where we stand now: TA

    In the replies to this post, I will append some charts and comments to support the following main conclusions:

    a) There is strong support in the $4.71-$4.85 band.

    b) Given volatility and plenty of bull traps today, expect more of the same tomorrow, aiming at getting your shares on the cheap. The grand finale is a major bear trap.

    c) Given a) and b), a Machiavelo's inclined (sinister) mind, would make everything possible to get price below $4.71 to trigger as many stops as possible. "Professionals" know that the stops are there. So, be ready for the eventuality of a big drop if they (whoever they are) succeed in bringing price into the $4.50 - $4.70 area. That, in turn, may induce a very pronounced but (hopefully) short lived spike into the $4.00 - $4.50 zone. (Example: Gap down after BLOSSOM to $4.24; they may attempt that again.)

    d) There is strong support at $4.71; so it is not given they shall be able to achieve such goal, but they certainly will try. Much of their chance of success depends on what % of the recent humongous turnover was from "amateur" retail investors (the weak hands). I may attempt an estimate later of how long will this volatile period may last.


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    • Nice work Guido. I wish I hadn't bought so soon....wish I would have waited unitl now to buy...I'm getting killed, but hanging in there....

      I'm thinking that pps will trade sideways until the obesity conference in late Oct...

      any opinions on timing as to when we will get out of this mess....

      • 1 Reply to bcrxboy
      • We need to clear up this volatility, which may last a few days, perhaps even only one more day.

        Then, the script for a breakout from a 3 month long triangle is CONTINUATION.

        Expect a move of size equal (in % terms) to the first up leg from $2.26 to $5.64.

        Taking a base at about $4.70,
        we should reach the $6-$9 area (too lazy now to review the detailed calculations).

    • I see today's big down as a gain. I just closed my PUT position. Your chart call was uncanny. It seems that the $4.7 support is strong, but a strong drop keeps getting thru it. It's not my battle, I sold $9 strike PUT's at $4.3. The premium was actually negative, as they sold with the stock price at $4.66. I considered buying stock and assigning it, but the hassle did not seem worth the extra few cents. And ARNA has shown some big bounces up in the past, so better see how the $4.70 line hold from the sidelines.

      I don't know whether the lack of PUT premium means anything or is just noise.

      Good luck to all. My own bias is still that Arena has a bit of possible downside room, and especially if the market has a sell off.

      Lorcaserin approval is an all-or-none proposition. I think there is some serious risk holding ARNA around the FDA process. Take that as one crackpots opinion, and invest based on your own risk assessment.

    • it has to up today.........

    • Yesterday, holding 4.95 off a key Fib. line was major, we should now head North. R= 5.09 then 5.20's, crack that and 5.50's are next. imo

    • This is why i think this MB is the best where i´ve been to! tks Guido! Fabulous work


      This chart shows that in addition to the apex support level and the price by volume (yellow zone) of the previous chart (see Part I), we have two more measures supporting $4.70 as a key level.

      One is a 76% retracement of the big recent move from $4.24 to $5.61. During the triangle development, this 76% occurred consistently in all legs.

      The other is the uptrend line that defines the lower boundary of the triangle.
      This uptrend line hits the $4.50 - $4.70 zone at the end of September (that is, now).

      Thus, if someone wants to trigger an avalanche of stops, what they have to do is to get price below $4.70.

      Be ready in case they succeed. Know in advance what is your strategy.

      Your stop should be where price is not expected to go (and your position sized accordingly). Remeber that the Market Edge Sell Stop is something like $3.69 and they expect support at $4.55
      (just below the apex).

      After a few swings, price will resume its uptrend.
      How long this will take depends on what % of the recent volume comes from "amateurs" or retail investors.

      Most of this volume should be institutional, but even a 10% - 20% from retail is perhaps significant, given the recent record volume.


      This chart shows that close today at $4.95 lies above a strong support zone in the $4.71-$4.87 zone. Today's low was precisely $4.87.

      Additionally, the apex of the recent three-months long triangle lies at $4.71.

      Note also how the down-slanted upper boundary of the triangle (a support line) intersects the yellow support zone.

      Price is currently above all three: the apex support, the down-slanted triangle's upper boundary and the price by volume support.

      So, most of the stops are located in the $4.50-$4.70 zone (below all these three supports). That is the target of those who want to shake this tree hard, in order to trigger a flood of stops.

      Be strategically and psychologically ready in case they attempt this feat *and* succeed. Have a plan.

      • 2 Replies to guido_arnone
      • Guido, What a great read of the chart. If you ever want to teach charting I'm interested.

      • The chart in Part 1 shows also that price action is still bullish medium and long term.

        We had a premature breakout, followed by a false breakout,
        and then the true breakout followed by a (normal) pullback to the upper boundary (down-slanted) of the triangle.

        Price may go as low as the apex, and given the tremendous interest and the huge recent volume, we can expect high volatility to break (a false break) below $4.70 to trigger a flood of stops.

        ARNA and Lorcaserin's fundamentals are OK. Any bearish action will be temporary in order to shake you out. Also, technically, triangles are CONTINUATION formations, three out of four. Only after a long rally (in the fifth wave of a rally), you can expect a triangle to have a chance of being a reversal formation. That is not the case here; we are about to begin the third wave up toward $6.75 - $12.75 (more on targets later).

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