ViroPharma (VPHM)

Company

"ViroPharma Incorporated is committed to the development and commercialization of products that address serious diseases treated by physician specialists and in hospital settings. ViroPharma commercializes Vancocin(R) approved for oral administration for treatment of antibiotic-associated pseudomembranous colitis caused by Clostridium difficile and enterocolitis caused by Staphylococcus aureus, including methicillin-resistant strains. ViroPharma currently focuses its drug development activities in viral diseases including cytomegalovirus (CMV) and hepatitis C (HCV)." (company website)

Buy

21-Sep-06. After VPHM reported earnings in early August, it has been moving up briskly, turning the 50-day moving average up. For the past three weeks it apparently has built a new base around the $12.50 level, which it reached on exceptionally heavy volume. The fact that it has held so long at that level makes me hopeful that the consolidation will hold.

• Price momentum (PPO) — declining slightly during the consolidation period
• Trend (ADX) — weakening during consolidation, but buying pressure (+DI) is still on top
• Money flow (CMF) — flowing into the stock
• Relative strength (RSI) — still strong, although has weakened a little during consolidation
• Volume — almost 6 times normal volume on break from $11 to $12.50

Sell

4-Oct-06. My stop-loss order was triggered this morning when VPHM traded below $11.39 (trailing stop of 10% set at buy). I was not happy after yesterday's close to see that VPHM had suffered four consecutive down days and had ended by breaking through the lower Bollinger band.

The conventional wisdom about Bollinger bands is that when the bands narrow, it signals a potential price move up or down.

So far in today's session, the fall stopped just short of where VPHM had closed the day before it jumped up above $12.50. Given all the negative signs in the chart, I am probably fortunate that the stop-loss triggered. There is a big potential retracement, given the huge move from about $7.60 without a correction.