POZEN: Right Stock, Wrong Time (POZN)

At first glance, POZEN Inc. (NASDAQ:POZN) doesn't look like anything more than a volatile mover and shaker, currently overbought, and due for a dip. And truth be told, POZN is overbought and due for a pullback (and will be even more so, given this morning's bullish pre-market activity). When you take a step back and look at the much-bigger-picture though, you'll find that POZEN Inc. is only at the beginning of what could be a sizeable move for investors willing to give it some time.

First things first. POZEN is the biotech company behind Treximet, for migraines, VIMOVO, a pain-relieving anti-inflammatory, and a few other related drugs in the pipelines. The company's business model is primarily the creation of new drugs via the combination of existing and approved drugs with the aim of making the combination drug more effective than its individual components alone. It may not be ground-breaking, but POZN shareholders can certainly appreciate the lower-risk approach.

The strategy isn't the reason the stock's suddenly perked up though, and become trade-worthy. It's the combination of news of (1) the rights to market VIMOVO have been acquired by Horizon Pharma, (2) a special dividend of excess cash [how often is that a problem, right?], (3) the prospect for a partner with its so-called "safer aspirin" before the end of 2014, and (4) the likely approval of its two PA drugs in late January. Put them all together, and what POZEN Inc. has is a lot of things all working in a bullish direction for POZN shares.

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Perhaps more than anything else making the stock such a great buy right now, however, is the fact that all the news support POZN has pushed the stock above key technical lines, which in itself can act as a prod for further upside.

The weekly chart of POZEN below makes the point, though a monthly chart would have done just as well. As of August, POZN shares have moved above a key falling resistance line. Even before the break above that ceiling, however, we had already seen a higher major low. In combination, the two big clues tell us this tidal shift has been a long-time in the making. That's why it's also apt to be a long time in the unwinding, or in the rally that undoes the long-term downtrend. The stock may not hit a major headwind until the $12-ish area.

That being said, while POZEN Inc. may not hit a major headwind until it reaches the $12.00 mark, it will almost certainly hit several minor headwinds in the meantime, with the first of them possibly materializing today.

Assuming today's pre-market gain of 13% sticks, paired with the week's 10% gain already, POZN is up a whopping 23% or so in just a week. That's a tough act to follow, at least straight-away. So, the last thing you'd want to do here is jump on POZEN Inc. at a short-term high. Let it slide back a bit, then go fishing, and then be willing to sit on it for a while to let it give you everything it can.

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