Tuesday, November 21, 2006

VRTX a great company but the stock is overvalued

The charts show clear signs of short term correction. The stock price has appreciated 29% since end of October. The 50 day and 200 day moving averages are at 37 and 35.5 respectively. There is a lot of room for correction here. The good news from positive mid trial updates have been priced in. The only other piece of news that may move this stock is some toxicology results that are due to come out.

At 5.7 billion market cap and about 2 years removed from launch, I think it is a good time to unload more shares and options and wait for a better buying opportunity. I plan to purchase January $45 puts at $3.5 and wait for stochastics to signal oversold before going long with calls again.

I addition Susquehanna started coverage of VRTX with a negative rating that may weigh on the shares.