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How to Make 338% in 13 Days

Written By Brian Hicks

Posted August 3, 2010

If you’re not following the FDA, you’re not serious about making money…

…because, let’s face it, making money from the FDA couldn’t be easier.

Take our Arena Pharmaceuticals August 5 call recommendation… Thirteen trading days into the trade, we were already walking with 338% and 193% gains… as the chart went hyper-parabolic.

We even knew the momentum crowd was about to enter the fray… and drive this stock to the moon. Check out the MACD and DMI crossovers in this chart. As soon as the blue lines crossed above the red lines, we had bullish confirmation… and knew it was only a matter of time before the momentum crowd barreled in.

Arena chart 080310

And we’re set to do it again… because, let’s face it, making money from the FDA just got a whole lot easier.

You see, very few things have an impact on biotech stocks the way that the FDA has.

And that’s why we commonly refer to upcoming FDA decisions — the very reference that contains all pending FDA decisions on the newest cutting-edge and biotech innovations…

Leave yourself plenty of time to trade prior to FDA decision. We’re talking about two to three months in advance here.

While these decisions are among the biggest factors, know this: The FDA’s unpredictable nature won’t always lead to a sure-fire winner.

While it doesn’t always matter what the FDA says; what does matter is being in the know, and being in the right place at the right time.

Most of us who use the FDA calendar and Phase III trial dates know one thing: The price of a biotech and pharmaceutical company will go up as the date in questions draws closer.

And if you want to maximize your potential return, have any pending dates in hand at least one to three months in advance. (I should note that in some instances, you can buy a stock days in advance using conference dates.)

Because as an FDA decision date, Phase III result date, or conference nears and people expect to hear good news, crowds of speculators and traders start coming in to buy the stock, sending the stock up.

This happens over and over again with many biotechs and pharmaceuticals. The key is having the information in as far in advance as you can…

In the case of our recent Dendreon (DNDN) trade, which produced 65% and 71% gains, we were able to profit within a day or two of a presentation at the ASCO Genitourinary Cancers Symposium. Buying ahead of this conference, where speculators anticipated an explosive upside move, resulted in quick gains.

Sure, ARNA ran up already… but we’re buying in again on any pullbacks. And we still have another 11 explosive Arena-like options trades coming up. Here’s one of them.

Check out MannKind (MNKD)

MNKD just re-submitted a once-rejected new drug application to the FDA for its inhaled insulin and inhaler combination. And we expect FDA action by the close of the year… as do many trades already bidding it up.

According to reports:

Although the FDA’s acceptance of Mannkind’s revised application has no bearing on whether Afrezza will ultimately achieve approval, it is an “incremental positive,” says Rodman & Renshaw analyst Simos Simeonidis, in a recent client note. Without access to the content of the complete response letter, some investors had feared that the FDA might have asked Mannkind to conduct lengthy new clinical trials before it would accept a revised application for Afrezza. The company’s relatively rapid resubmission of its application dispels that fear, Simeonidis says.

Afrezza is a powdered insulin for helping adult patients with type 1 and type 2 diabetes mellitus control high blood glucose, also known as hyperglycemia, which is a major cause of diabetes-related complications. An FDA decision on the drug was initially expected by January 16. The agency’s new Prescription Drug User Fee Act action date for Afrezza is December 29.

While we’re seeing action in the November 2010 calls, it’s the January 2011 calls where we expect to see more action. We’ll look to issue a buy on this shortly. Some of today’s action is from short covering on news that the FDA accepted the application.

Note: Even if you don’t understand options, learn about them now… because once the 11 trades are exposed. you want to be fully prepared for the run. Learn more about options here.