As of 04/24/2024   Indus: 38,461 -42.77 -0.1%     Trans: 15,078 -358.61 -2.3%     Utils: 893 +6.79 +0.8%     Nasdaq: 15,713 +16.11 +0.1%     S&P 500: 5,072 +1.08 +0.0%	YTD  +2.0%   -5.2%    +1.3%    +4.7%    +6.3%	Targets    Overview: 04/12/2024     39,800 or 37,150 by 05/01/2024   16,200 or 15,000 by 05/01/2024   885 or 850 by 05/01/2024   16,700 or 15,800 by 05/01/2024   5,250 or 5,025 by 05/01/2024
Chart Pattern Indicator: on 4/23/24

As of 04/24/2024   Indus: 38,461 -42.77 -0.1%     Trans: 15,078 -358.61 -2.3%     Utils: 893 +6.79 +0.8%     Nasdaq: 15,713 +16.11 +0.1%     S&P 500: 5,072 +1.08 +0.0%	YTD  +2.0%   -5.2%    +1.3%    +4.7%    +6.3%
Targets    Overview: 04/12/2024     39,800 or 37,150 by 05/01/2024   16,200 or 15,000 by 05/01/2024   885 or 850 by 05/01/2024   16,700 or 15,800 by 05/01/2024   5,250 or 5,025 by 05/01/2024
Chart Pattern Indicator: on 4/23/24

Bulkowski's Vivus Trade

This article discusses a trade in the biotech firm, Vivus.

The chart shows a trade I made in Vivus (VVUS), on the daily scale.

On Sept 9, 2009 the company "Announces positive results from two phase 3 studies; obese patients on Qnexa achieve average weight loss up to 14.7%" according to google. As the chart shows, the stock responded by gapped higher from 6.91 to 11.80, or 71%, at B.

Two days later, the CEO sold 200,000 shares. Smart move. The two blue As are an Adam & Adam double top chart pattern, suggesting the stock would drop, which it did.

At C, the company announced that they would sell 9 million shares. The stock dropped 5% after hours. Two days later, they set the price at 10.50 and completed the offering on the 23rd..

As the steady decline shows, anyone participating in the offering got hosed.

Price bottomed at 7.07, almost closing the gap at B. Five days later, I bought the stock and received a fill at 7.80. My notes for the trade say, "11/11/09: I believe this has retraced all it's going to so now is the time to buy. The stock has hit support setup by the bottom of the large gap and a prior peak in late July."

Vivus: The Sale

It took a while for the stock to move higher, but that was the general trend. Since I didn't expect to sell anytime soon, I ignored the stock until June 15 (that means I checked it daily but saw nothing of concern).

My trading notebook has the following entry on the sale. "Downward breakout from a symmetrical triangle with possible negative potential on FDA approval due to heart side effects. ONE analyst speculates that the FDA will turn down the drug due to insufficient evidence that it does NOT hurt the heart. Got a great fill considering it opened at 10.56."

I sold the stock the next day, June 16, and received a fill at 10.71. I made 37% on the trade. The reason I sold the stock is because I got burned earlier in the year on Medivation, and didn't want to ride this stock from a profit to a loss, as I did that one.

Fortunately, I was lucky enough to sell the stock when I did. A month after I sold, the FDA rejected the weight-loss drug on safety concerns. The exchange halted trading and after hours the stock was down 57%. When it opened again, the stock closed 55% lower, eventually sinking to a low of 4.69 before recovering.

-- Thomas Bulkowski

More

See Also

• Coldwater Creek (CWTR), congestion breakout on entry, hit stop on exit, 83% in 7 weeks.
• CNO 2.0. Fibonacci retrace on entry, inverted dead-cat bounce on exit. I made 90% in 2 months.
• Encore Wire (WIRE), rounded bottom on entry, inverted dead-cat bounce on exit, +24% in 2 months.
• hhgregg (HGG), symmetrical triangle on entry, 2B on exit, 13% in 3 months.
• Hudson Highland Group (HHGP), head-and-shoulders on entry, hit stop on exit, +55% in 3 months.
• National Fuel Gas (NFG), ascending triangle on entry, hit target on exit, +23% in 3 months.
• Nicor (GAS), symmetrical triangle on entry, premature sell, +15% in 6 weeks.
• Tesoro (TSO), head-and-shoulders on entry, change in fundamentals on exit, +3.8% in 2.5 months.
• ZEP (ZEP), spin-off buy on entry, 2B chart pattern on exit, +1% in 5 weeks.

 

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