Mannkind (MNKD) Running for the Good of Mankind.

Speculative Biotech - A Mind of its Own. MNKD Proves a Winner for SCN Members.

I could go back to the weakest of markets over the last 15 years and can inevitably find a speculative biotech stock or two that were managing to go parabolic at the major indexes' weakest points. Many speculative biotech stocks tend to have a mind of their own, regardless of what the rest of the market is doing. Why? They have an audience of their own and the fundamentals of biotech stocks generally aren't measured the same as most other stocks.

We define speculative biotech as a company that has either yet to receive first time FDA approval of a drug candidate, produce revenue worthy of its market cap and/or has no significant contract agreement intact that is going to yield the company the kind of numbers that makes other stocks look so attractive.

These stocks often trade on promise much like junior mining exploration stocks in gold or oil. They move on the "possibility" of hitting pay dirt. In the case of speculative biotech, a stock's strong movement to the upside is usually predicated on a few key factors. The obvious is they're getting very close to FDA approval. The not so obvious is a key partnership development agreement with a big name pharma or a funding arrangement that is going to allow the company in question more time and more effort to achieve the highly coveted FDA approval.

We initiated coverage of Mannkind (MNKD) back on June 22nd at $2.08 per share. The stock has absolutely bucked the markets' trend in recent weeks running to a high of $2.84 as I type, thus yielding SCN Members with a gain of roughly 35% in just over two weeks! This is just one reason we love technical analysis, although there does appear to now be a few other things surrounding the Company that is starting to reveal the reasons why maybe the stock looked so good from a technical perspective back in late June.

The Company continues its fight to bring its inhaled insulin therapy to market. A product in my opinion that makes perfect sense. After adjustments and additional trials ordered by the FDA, the stock is most definitely starting to behave like its finally on its way to an FDA approval. Now don't get me wrong, I'm not saying they're getting it. I'm saying the stock is starting to behave like it will. It still has a lot of work to do though.

Additionally, it appears the CEO and Chairman, Alfred Mann, has put over $77M of his own money to work in the stock. Now that's what I call significant insider buying.

This Thursday, the Company will be presenting at the JMP Securities 7th Annual Healthcare Conference at 2:30 PM (ET) at The Peninsula Hotel in New York. Interested parties can access a link to the live webcast of the presentations from the News & Events section of the Company's website at http://www.mannkindcorp.com. How the stock trades on the heels of that conference is likely going to provide more clues on MNKD's validity of getting its FDA approval.

Lastly, from a technical perspective, the recent volume in MNKD has been impressive and that's what we're looking for in a speculative biotech. I've included a daily chart here of MNKD. If you didn't get in already, I would suggest an entry off a pullback to the 3X3 DMA (blue line) here. Keep in mind, as a stock moves, so does the 3X3. Therefore, anywhere around $2.40 to $2.50 might be a good entry.

In all fairness toward being objective, it's important to note the last time shares of MNKD traded slightly above its 200 day simple moving average (black line), it failed miserably. Any significant follow through strength from here or after a slight pullback would definitely suggest something different might be going on this time around.

Just in case, make sure to use a protective or trailing stop you're comfortable with because there's not much worse than letting a winning trade turn into a losing one.

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