Is this a short squeeze in the making? Let’s look at Mannkind (MNKD) (August 26, 2015)
A lot of volatility in the market, this MannKind ( NASDAQ:MNKD ) stock is no exception, and so I want to chat about this real quick. This has a really, really high short interest, it kind of always does. You look at times like this and you could say, “Well the shorts were right.” They were sure right about this one, they were sure right about this one when the company received approval, I think this was the approval one for their Afrezzaâ insulin delivery system, and the stock just got absolutely crushed. Maybe that was for something else, I think it was over here.
Anyway it doesn’t really matter. I’ve been trading in and out of this stock, I don’t have a position right now, but I’ve been trading in and out of this stock for a while. I remember this would have a big move higher and you’d think, “Oh those shorts are going to get screwed.” And they did, right at the open, and then the stock continued down. So we have the same thing here. Here’s my point, the last time the stock came down to this level it really started to rally hard, I think that was a short squeeze. I’m looking at this here; I think you could see another one coming because the stock is down. It’s down to a really, really low level, the lowest. Right?
So if you’re buying the stock, and I think I’ll be doing that tomorrow. If you’re buying the stock tomorrow up here, you want to keep you’re stop, a really tight stop, right down here beneath 3.25. Now that’s a pretty hefty risk. It doesn’t sound like much but it’s 40 cents. Forty cents on a $3.65 stock isn’t “chicken feed” unless you’re only buying 12 shares. But what you’re looking for is this,
lets say you buy some at the open tomorrow, and you also then wait until the stock goes above yesterday’s intraday high, you know where it gapped up and then tanked; that high was 3.82.
So you’re buying a little bit here and then you’re taking a full position at 3.82, 3.83, 3.84, whatever. When it’s above here. Now you’re at a full position and then don’t look for much, for crying out loud you’ve got a full position size on at 3.82. If you can sell it at 4.25 or so, that’s a good trade to me, because the stock’s so cheap. On the other hand if the stock doesn’t ever get back to here and instead falls below this 3.25, then you’re out with a small loss because you had a small position.
That’s how I would trade MannKind ( NASDAQ:MNKD ). This trade all stems from two things: first of all the market is no longer under massive distribution, second this has a very, very high short interest, and third, it is down at a level where it did bounce before. Here it’s been trying to, so we manage our risk by taking a little position now and then build on it once the stock shows you that it is actually moving higher.
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