Bulkowski's Human Genome Sciences Trading Quiz

The triangle has broken out upward.

From my trading notebook.

"Date: 6/30/05. Trade time: placed after the close today. Filled at 11.71. Stop: 10.63. Upside target: 13.45 using 100% measure rule or 12.58 using 50% of height. Future Nasdaq direction (guess): It's at the bottom of a broadening pattern with a partial rise, expect a downward breakout.

"Buy reason: ascending triangle with potential upward breakout. This is high risk as market is unsettled and I predict it will go down in the short term. Earnings are due 7/25. In the third quarter, drug trial results are due from lupus trial of lymphoStat-B drug in phase II. If results show promise, the stock will pop. Otherwise, it might DCB [dead-cat bounce]. In short, I think this will result in a losing trade. Why invest? It's a buy signal. Period. Use a stop to minimize the loss. If the general market pulls the stock down tomorrow or in the future, the stop order to buy won't be hit."

Here is my notebook entry for the sale.

7/5/05. Stop placed at 10.91, just below the 63% Fibonacci retrace since the stock has broken out to new highs. Potential loss: 7%.

7/8/05 (Friday). Stop raised to 12.13. That's just below the intersection of a long term down trendline on the weekly chart and just above the 50% Fibonacci retrace line. I'm tempted to sell and cash in after just a few days in the trade. The high volume suggests a dearth of new buyers waiting in the wings, but with the positive news of a broker covering the stock and promising news on the drug trial front (Glaxo taking an option), this might be a longer term play.

Date: 7/11/05 (Monday). Sold at 13.72, at market open.

Sell reason: This is up on a broker initiated coverage with a buy (on Friday). Very heavy volume but it's less than yesterday even though price closed higher. My guess is the stock will open lower and head back down. Momentum is slowing. RSI [relative strength index] is overbought. ROC (rate of change) is overbought. The indicators are saying it's time to bail out.

I bought at 11.71 and sold at 13.72 for an 11-day gain of 17%.

Looks like I sold about two weeks too early but I was lucky to stand aside while the stock dropped in half when one of its drugs in development failed trials.