) -- It's been awhile since a stock has stirred up so much emotion among my fellow biotech investors and traders as

Peregrine Pharmaceuticals


, and honestly, I'm not going to pretend that I have strong conviction one way or the other .

My friend Adam Feuerstein already did a great job explaining some of the

question marks

surrounding the outstanding phase 2 data presented last Friday.

There are other issues with the bavituximab data: If bavituximab were truly an active drug, why aren't we seeing more side effects when it's added to chemotherapy? And the fact that bavituximab barely improved progression-free survival is a concern, as is the company's refusal on Monday to provide an exact geographical breakdown of the phase II data other than, "the data were similar across all geographic regions."

That being said, to just dismiss the data as being too good to be true might mean missing the next great cancer stock play. Frankly, the bavituximab question marks are very similar to what we heard years ago with a little prostate cancer drug called Provenge. I was one of those traders who thought



Provenge data were quite suspect and could not be confirmed or repeated for a lot of the same reasons the biotech world is now questioning bavituximab. But Dendreon believers won that argument when Provenge was approved and Dendreon's shares rose from $3 per share to $43 in two years' time.

If one does not believe the bavituximab data were tampered with somehow -- and I count myself in that camp -- there is a real possibility that this lung cancer drug does what it was designed to do and actually stimulates the immune system to recognize cancer cells and kill them.

There is also the possibility that this result was a false positive and will not be repeated in a larger, more robust trial. However, crossing my fingers and waiting several years does not seem like the greatest strategy for a biotech trader.

With Peregrine, traders are looking at a stock with the potential for big upside and downside. When I lack conviction equally about the bull and bear case, here is how I tend to trade:

First, I look to see of there is a near-term catalyst that might help the stock. In Pererine's case, there are two. First, the company says it is receiving interest from large pharmaceutical partners for bavituximab partnership. Peregrine's CEO said Monday he wants to sign a deal as quickly as possibly, preferably before the company meets with FDA to discuss the design of the phase III trial.

Second, Peregrine plans to announce updated results from a phase II study of bavituximab in first-line lung cancer patients. These data should be released before the end of the year, and if positive would likely send the stock much higher.

With two, near-term catalysts ahead it makes sense to buy Peregrine here, keeping the chart as a guide for further entries and exits.

When the bavituximab data were announced on Friday, Peregine shares shot up from $3 to $5 before backing off. A close over $5 per share would mean the stock has a clear path higher, so I might want to buy a little stock here and add to it on a strong move over $5. Or, for those who want to play it even safer, just wait for the $5 level to break before entering.

I think it's quite possible Peregrine continues to frustrate the shorts and keeps going higher into one or both of the near-term catalysts mentioned above. A strong move in Peregrine's stock price above $5 would be a great signal.

As far as a stop level is concerned, I would trim my position under $4, which was the low on Friday afternoon after the data came out. I'd sell everything if Peregrine shares moved below $3. If the stock moves below $3 we can be assured the stock is going nowhere anytime soon.

With a stock like Peregrine where my conviction level is low, I keep my position sizes very small as well. There is plenty of opportunity to load up on stocks when one has more confidence but that doesn't mean traders need to avoid the stock altogether.

Rosenblum is long Peregrine shares.

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Dan Rosenblum has been a full-time stock trader since 1999 after leaving a job at a publicly held medical-device company. Rosenblum joined

that year and has been the online trading community's resident biotech expert ever since. Rosenblum writes the

newsletter, which has outperformed the S&P 500 and the Nasdaq Biotechnology Index every year since its inception in 2006. Rosenblum lives with his wife and kids in Rockland County, New York.