Salix Pharmaceuticals (SLXP)

Company

"Salix Pharmaceuticals, Ltd., headquartered in Raleigh, North Carolina, develops and markets prescription pharmaceutical products for the treatment of gastrointestinal diseases. Salix's strategy is to in-license late-stage or marketed proprietary therapeutic drugs, complete any required development and regulatory submission of these products, and market them through the Company's gastroenterology specialty sales and marketing team. Salix also markets XIFAXAN®, VISICOL®, OSMOPREP�, AZASAN®, ANUSOL-HC® and PROCTOCORT®. In August 2006, the FDA approved MOVIPREP® for bowel cleansing prior to colonoscopy, and we intend to launch sales of the product in mid-fourth quarter 2006. Balsalazide tablets, Granulated Mesalamine and SANVAR® (600 ug vials vapreotide acetate powder) are under development." (company website)

Buy

2-Oct-06. Salix broke through a year-long downtrend in August after reporting earnings. It broke through the 200-day moving average in September and has now retraced back to the 1-month average, making it over-sold at the moment.

Price momentum (PPO) — sharply picked up, although slowed during the pull-back
Trend (ADX) — still strong, although weakened during pull-back
Money flow (CMF) — strong in-flow until the pull-back, and is still flowing in
Relative strength (RSI) — back to neutral after a strong period
Volume — a little worrisome, since average volume is falling slightly

There is some risk in this buy, but SLXP has retraced about 50% of the most recent rise. What I am certainly counting on is that the 200-day moving average will not be insurmountable resistance. MarketEdge has resistance for SLXP at $14.40 and support at $14.20. My buy was considerably below both of those.

Sell

Bottom line
1%

27-Oct-06. When Salix hit a new high of $15, that raised the activation price for my trailing stop to $13.64. The stop-loss was triggered early in today's session.

I'm a little disappointed in how this worked out. At one point I was up almost 10%, but my position stopped out with a meager profit of 1%, barely enough to cover trading costs and buy a cup of coffee. I left a lot of money on the table with this one, and I may have to rethink how I apply the trailing stops.