VIVUS (VVUS)

Company

VIVUS is a biopharmaceutical company developing innovative, next-generation therapies to address unmet needs in obesity, diabetes and sexual health. The company's lead product in clinical development, Qnexa™, is expected to complete Phase 3 clinical trials for the treatment of obesity in mid-2009, with an NDA filing for Qnexa expected at the end of 2009. Obesity affects more than 300 million people worldwide and is a leading risk factor for diabetes, heart disease and stroke. Qnexa is also in Phase 2 clinical development for the treatment of type 2 diabetes. Analysts speculate that the potential market for obesity ranges from $5 billion to $10 billion annually; the potential market for an effective diabetes therapy that causes weight loss is in excess of $2 billion. (company website)

vvus(3-1)
VVUS 4-month chart
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VVUS 1-year chart

Buy

Earlier in the week when the PPO was crossing above the signal line, I put in a buy order for VVUS at what looked like a pretty good price. When shares plummeted, I got my price — and an immediate loss!

The 50-day moving average is crossing above the 200-day MA, which is usually a bullish sign. On the other hand, the sell-off did bring the price below the channel in which VVUS has been trading. This bears watching closely.

  • Percentage price oscillator (PPO) — crossed below the signal line with latest sell-off
  • Volume — many higher-than-average days recently

Based on technical analysis, MarketEdge calls VVUS a "strong buy" in a "strong upward trend."

Sell

gain Bottom line
23%

VVUS set a new high again on Friday, but this morning the air went out of the balloon. Despite a good opening, the price began to tumble, and at $7.24 my trailing stop bumped me out of the position.

This was actually the first test of my latest strategy that involves setting multiple stops to address a variety of situations. To my way of thinking it worked quite well. VVUS climbed steadily for the past 10 days and it seems ripe for another down-cycle. The PPO line began to bend today as a result of the selling. It's quite near the top of a new upward channel with a smaller slope than the previous one.

And, with earnings due out next week, this is a good time to salt away a nice profit, lest some surprise send it plummeting.