Salix Pharmaceuticals (SLXP)
Company
SLXP 1-year chart
"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 150–member gastroenterology specialty sales and marketing team." (company website)
SLXP 6-month chart
Sell short
8-May-08. Salix stock plummeted at the end of 2007 and appeared to hit bottom in mid-March at $5.40. Since then a new trend line was established forming one of those very promising flag patterns in the chart. When SLXP reported earnings this week, however, they missed expectations by $0.04, and that drove the price back down below the downtrend line. I'm betting that the price will fall even more.
- Price momentum (PPO) — generally rising, but falling after earnings
- Relative strength (RSI) — on the negative side of neutral
- Trend (ADX) — weak, but selling pressure (-DI) has crossed above buying pressure (+DI)
- Volume — a lot of shares change hands every day, but average volume has fallen steadily over past 3 months
Based on technical analysis, MarketEdge calls SLXP a "long" but it is "moving against opinion" and the chart indicates a "possible trend reversal."
Buy to cover
Bottom line-10%
15-May-08. SLXP doesn't seem to understand the plan! It's supposed to be falling. In the interests of not losing too much money, I covered half my short position today. Half, because I'm not entirely convinced that SLXP really is in a "weak uptrend" (as MarketEdge says). What gives me hope is that it has risen to about $7.40 three previous times this year only to fall back again. There really is no trend — the ADX has fallen to 10. I'm going to give it a few more days to see if it breaks up or down.
16-May-2008. SLXP fell again early in today's session and I decided to cover the remaining shares of my position. All the averages are going up, and MACD looks bullish. Upon reflection, the odds don't seem to be with this bet, and betting on beating the odds is pretty foolish.