This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

How to Trade Hemispherx Even If You Hate the Stock

Stock quotes in this article: HEB

NEW YORK ( TheStreet) -- Last week, my colleague Adam Feuerstein laid out the fundamental bear case against Hemispherx Biopharma (HEB). I, too, believe the FDA will reject Ampligen, the company's drug for chronic fatigue syndrome.

Unlike Feuerstein, I'm a trader of biotech stocks. Hemispherx is a bad investment but the stock remains a good trading opportunity, particularly with an FDA advisory panel for Ampligen scheduled for Dec. 20.

Here are four factors that make Hemispherx an interesting trade over the next three months:

1. Hemispherx is a cult stock, and like all cult stocks, there exists a group of retail investor fanatics who will defend the stock to their death. No counter-argument, no matter how reasonable or factually supported, will be considered. Negative stories about Hemispherx are reasons to buy more Hemispherx. Positive stories about Hemispherx are reasons to buy more Hemispherex. If a cult investor can't afford to buy more Hemispherx, he will work to convince others to buy more Hemispherx. As catalysts like FDA panels or approval decisions dates near, the Hemispherx cultists will become more bullish, his price targets more outlandish. For these reasons, the run-up in cult stocks is often exaggerated.

2. The same Hemispherx trade worked great in 2009, so no reason to expect history won't repeat itself this time around. In the middle of 2009, Hemispherx shares went on a run from 50 cents to more than $4.50 fueled by speculation and hype surrounding the FDA's original review of Ampligen. Good traders remember stocks that trade well -- Hemispherx included. I expect traders to be drooling over another chance at Hemispherx this time around.

3. There are no drugs approved specifically treat chronic fatigue syndrome. Whether or not you believe Ampligen works, Hemispherx will own the market if the drug is approved. That's a big opportunity for a company with a $100 million market value and another reason why bulls are so excited. Traders take advantage of such optimism.

4. Hemispherx has clearly defined timelines for its tradable catalysts. Run-up traders, therefore, have a specific date in which to exit trades safely. FDA is convening an advisory panel for Ampligen on Dec. 20. That means two business days before the panel -- Tues. Dec. 18 -- FDA will release briefing documents for the panel, including the agency's clinical review of Ampligen. This FDA review will have a dramatic effect on Hemispherx's stock price, one direction or the other, as will the panel itself.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,898.57 -144.33 -0.85%
S&P 500 1,957.12 -15.17 -0.77%
NASDAQ 4,447.4270 -45.9630 -1.02%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs