Whether or not today's 6.2% dip from MannKind Corporation (NASDAQ:MNKD) is a 'big deal' is a matter of perspective. For those who bought into the stock yesterday, yes, it's a step in the wrong direction at the wrong time. For us and Small Cap Network readers who keep tabs on our Featured Stocks - and use them as trading ideas - it's not a big deal. See, we've got a pretty large profit cushion between the point when we picked MNKD and now, and with that profit cushion comes options.

Be that as it may, the interesting part about this story is what's happened with MannKind Corporation between our June 22nd suggestion and now.

If you were reading then, you may recall our commentary/rant on the weird MannKind saga. Its flagship drug Afrezza - an inhalable insulin that actually worked - looked like a proverbial slam dunk with the FDA back in January of 2011. In fact, a gentleman who worked for the FDA who had a history of buying stocks before key FDA approvals (yep, an illegal use of privileged knowledge) even bought into MNKD before the announcement date. All seemed fine, in fact, until some key people at the FDA received an unsolicited letter from a hedge fund manager known for short-selling biotech stocks telling the FDA it shouldn't approve the drug. (Yep, that's more than a little suspicious too.) Whether it was because of the letter or not isn't clear, but the FDA ended up denying Afrezza, for reasons that still seem shaky. [If you want the whole bizarre story, here it is.]

So what's changed in the meantime? The stock's price, for one thing. MannKind shares are currently at $2.67, up 26% from June 22nd when we first told you about it, though it had been up as much as 37%. That's not the only things that's different, however.

Per a July 3rd SEC fling, a pair of insiders bought a combined 31.2 million shares of MNKD, to the tune of $77.2 million. For perspective, it's a $451 million organization.

The short interest is stirring the pot too. This has long been a battleground, at least between the pumpers and bashers. It's not been an unjustified battleground though. As of the middle of June, 18.2% of the float was held as short trades. The folks who said MannKind Corporation was setting up a short-covering rally were right, and it's not likely over yet. The rally between then and now has surely whittled the short ratio number down too, but the question is, how much short interest remains? [Our guess: Not a monumental amount, meaning any further rally will have to be real rather than short-covering induced.]

Than again, the company has what it needs to make that happen.

So what do we do with MNKD today now that it's taking a hit? That depends on your situation.

For SCN readers who stepped in back on June 22nd when we first presented it as a trading idea, you've got plenty of wiggle room. Just to hedge your bet, though, that group could sell half and lock down a nice gain, and keep holding the other half to be in position for another bullish wave.
For those who only got in recently, today's selloff is pretty harsh... the kind that incites more selling. You can ride the storm out, but know that the storm could pull MannKind all the way back to the 200-day moving average line (green) at $2.54 before any technical support is found. Any move under that level would feel painful, but that would actually make MNKD a strong buy again after we saw the first bullish move (an 'up day) following a tumble under $2.54. It's a move Small Cap Network readers don't really need to worry about yet either way.


http://www.smallcapnetwork.com/Getting-a-Bead-on-MannKind-Corporation-NASDAQ-MNKD/s/via/1789/article/view/p/mid/1/id/182/