Saturday, 1 December 2007

In the Vortex of VRTX

I once played with Vertex Pharmaceuticals (Nasdaq:VRTX) and made 8% in just 2 days. Little did I know that at that time, VRTX was in the midst of completing a reversal pattern.

As you see in the longer term chart, VRTX looks like it's in the final stages of completing a triple top. What's unusual with this triple top is that the neckline is slanted downwards. This now gives us a possibly delayed breakdown. But once it does breakdown, it's gonna be a long way down. First of all, prices are now below the moving averages. Bearish sign #1. Next, the 50MA is just about to cross the 200MA: Bearish sign #2. The MACD is below the zero line: bearish sign #3.

So given that things look bad, where are we supposed to place our bomb? Definitely when the neckline has been broken significantly.

Based on the latest data, the neckline I see for VRTX is $24.21 as of this writing. The downside target? Hold on to your seats, folks. Based on the highest of the three peaks, VRTX could go down to as low as $5.99. That's a 75% return!

The problem is we have no idea how soon this can happen. But if we follow the maximum rule, then we should hold this for around 2 years. Anyone with that kind of patience?

I don't think I can wait that long.

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