HEPH

[David Randolph]

The news is the following:

«Hollis-Eden Shares Rise on Contract Hopes
Monday September 26, 4:00 pm ET
Hollis-Eden Shares Spike 18 Percent on Hopes Drug Maker Can Secure Government Contract

NEW YORK (AP) -- Hollis-Eden Pharmaceuticals Inc. shares rallied Monday as investors snapped up the stock ahead of a bidding process that could hand the company a lucrative government contract.

The San Diego-based company is among dozens of drug makers the government might tap as part of its Project Bioshield. The government-sponsored program will buy $5.6 billion of drugs and vaccines over 10 years to build up the national stockpile in case of a terrorist attack or other disaster.

Investors hoped Hollis-Eden's treatment for Acute Radiation Syndrome, Neumune, might be among those bought by the Health and Human Services Department. Neumune is Hollis-Eden's lead drug candidate. The government will be sending a draft Request for Proposal later this week (on Friday) to drug companies, and inviting them to comment on the process, according to HHS spokesman Mark Wolfson.

Shares of the company spiked $1.49, or 17.3 percent, to $10.10 in afternoon trading on the Nasdaq. The stock is still trading off its 52-week high of $12.20 set last October.

Wolfson said he did not know how many companies would be bidding on the contract to treat radiation. He said a number of companies could be tapped to supply drugs, or it could fall to just one bidder.»

We'll only know on Friday if the government will buy the drugs and vaccines at least partly from HEPH. The market is discounting something here, maybe somebody knows something and is buying ahead of the crowd, I don't know. What I know is that we have a clear «buy the rumor, sell the fact» setup here.

I will buy the rumor at tomorrow's open on HEPH, as usual, 6.66% of the 3 Stocks on Fire Portfolio. Let me just leave you some charts:



And the short term chart:



www.3stocksonfire.org is a community of traders and investors. David Randolph manages two public portfolios there, the 3 Stocks on Fire Portfolio and the 3 Pennies on Fire Portfolio. He updates the analysis of every holding of his portfolios everyday, so you can check here for updates on HEPH every single day. If you want to receive 3 Stocks on Fire newsletter and exchange trading ideas and stock picks on our message boards, please register, it takes only 10 seconds  

[David Randolph]

It wasn't smart to buy on a gap up after such a bullish run, so I waited a bit to buy and got in at $10.30, still pretty much close to the high of the day.

The candlestick pattern is a meeting lines pattern, which is a bullish continuation pattern. I believe this stock will rise at least until Friday, as buy the rumor supports the stock.

I will continue holding HEPH.

[robt]

Exit strategy may be a problem if they don't get the contract. Do you plan to hold until the announcement is made?

[David Randolph]

Exit strategy may be a problem if they don't get the contract. Do you plan to hold until the announcement is made?

The rumor is this:

The Department of Health and Human Services is expected to issue a draft of a Request for Proposal (RFP) on Friday for such biodefense drugs as Hollis-Eden's Neumune, a treatment for radiation sickness. The RFP would begin the government's bidding process for drugs to be procured under the federal Project BioShield anti-terrorism initiative.

It's just a Request for Proposal so I believe HEPH will at least receive one of these, since Neumune is a treatment for the Acute Radiation Syndrome.

I've enjoyed market action yesterday and I will hold throughout today's session, after the close I will design a trading plan for tomorrow.

[David Randolph]

HEPH was up a lot at midday, then it went down sharply on heavy volume and recovered some to close almost unchanged for the day. This behaviour is explained by the way investors think: above $11 there were big short term profits to be made and no certainty about tomorrow's news.

So they took profits. When the stock went down below $10 bargain hunters kicked in, because at that price it was worth taking the risk for tomorrow.

I really don't like risk, but I know one must take some to get above average returns. I believe HEPH will get that Request for Proposal (RFP) from the government and will issue a press release on the subject. If we get these news probably we'll start seeing some buy the rumor about they winning a contract out of the $5.6B the government is planning to spend.

Do I really want to own this stock if they don't get the RFP? No, I don't, since that news was the origin for the technical buy signal. So, if the stock breaks $9.5 tomorrow I'll take my loss and move on (on an intraday basis).

If they get the RFP I want to let the profits run, because these news will fuel more buy the rumor for the stock. The number of companies that will get the RFP is important too, the fewer the better.

[Ramsburg]

Sold HEPH @ $9.46 for the 3SOF Portfolio, following David's trading plan:

Do I really want to own this stock if they don't get the RFP? No, I don't, since that news was the origin for the technical buy signal. So, if the stock breaks $9.5 tomorrow I'll take my loss and move on (on an intraday basis).

[robt]

Mr. Ramsburg, I was attempting to post as your message arrived:

I decided not to join you here, but I've been following and just saw the precipitous fall based on how paltry the govmnt contract turned out to be. I'm posting here in case anyone is unaware of the situation and is looking for news.

The contract is only for 100,000 doses, insufficient to support HEPH's current market cap even if they were to get the contract.

[ScottishTrader]

Good call Frederick, that was UGLY

Broke 2 support lines to $7.00 and is now in seriously painful territory.  I am very glad I didn't get in on this one, as I was fully invested elsewhere, but a perfect example of why it is so crucial to set your stops.

I really hope people didn't get burned badly by this one.

[SmartWrasse]

Hard stop set after seeing Davids update (Much appreciated!).  Out with small loss.

[jb]

I am stuck holding this one, and IDSA now.  Missed the post as I am working during the day.  I have huge losses in these two   I see stuff come through on Feedreader, but there is no way to see who the author is, this is one reason why I suggested david and ramsburg's posts be copied over to a  read only board for the open trade, daily updates, and close trade post, if this was the case, I probably wouldnt have missed both of these and be stuck holding the bag.

Happy trading all, glad most of you got out.

[nberski]

You are not alone - I am sure - that happened fast - --
I was away to town at exactly the wrong time ---
Very expensive gallon of milk ---
I lost about 30%  - but I am not continuing to hold - - -
I will recover by staying with SOF strategy
In for the long term & confident.

[Ramsburg]

That was an ugly move to watch...
But it was good that David established an intraday stop price this time.

I hope most of you have jumped out with a minor loss following the plan... This kind of move is a risk that we all should be aware when trading stocks, and it's a good learning lesson about stop orders...

Jb and nberski, I'm sad to ear that, I hope your next trades go well... :-(

[phabrux]

Ramsburg,
Buying at 6.3, is it not a deal at that price, considering its late historical price?

[stockgranny]

ditto ib and nberski.  I was busy last night and did not read david's exit stragedy and was gone all day today until a few minutes ago.  too bad for us.  I agree we should have david's updates in one place so as not to waste too much time.

[nberski]

A helpfull trick I use is to click on Davids name  - this takes you to his profile page  then go to the bottom of his page and click on the last posts of this person (David)

After your visit of Davids posts  you can revisit them - and get his fresh posts - by using your  search history window drop down.  It is fast and you can search through his posts on one page.
you get all his posts with only one or two clicks. 

Glad this weeks over - Tyria, SFP, HEPH  - They look like abreviations for diseases.