Speculative Stock: Pozen (POZN)

I read about POZN on page M5 in the Barron’s July 16, 2007 issue this weekend.  This stock is not for those with a weak stomach. Pozen is a drug company that has a new migraine medicine named Trexima awaiting a regulatory decision on August 1st.

If Trexima is approved POZN will take off based on the mass of people who suffer from migraines and will likely run to the pharmacy for relief from the new drug that beats the current standard, Imitrex.  POZN closed at 18.50 on Friday.  I looked at the chart and could see that it appears to be close to a trend line that could be a ceiling, but on a stock like this that will explode or implode in a two and a half weeks from now the chart is likely meaningless.  That is unless you want to get out before August 1st.  POZN will likely bounce around more for the next 12 trading days.  That will provide the opportunity to make some short term trades for those traders who thrive on risk and very short gains.  Be aware of the risks to the downside though.  Barron’s believes shares could drop to between 7.00 – 8.00 if Trexima hits a glitch.

I’m not planning to trade on it today since the Barron’s article could give it a lift for a few days and I think POZN is near the top of its typical trading range, pre-announcement.  The 50 day moving average is down around 15.  I wouldn’t be surprised to see it drop back to that line, even if only briefly, before the big 8/1 decision.  More probable though is a smaller dip to its short-term trend line that is approaching 17, close to the 10 day moving average. I might even BUY a call or two OTM.  You don’t have much advantage by buying ITM on a spec stock like this when all intrinsic value can vanish over night.  The puts have rich premiums, but the risk is too high for my taste.  I’d rather risk $2-400 by buying calls than more than that selling naked puts on a stock that could be devistated for years.

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