Trade Alert: Time to cover some of our VRX homerun short

Wow, I can’t believe my eyes as I see $VRX down another whopping 30% to $100 per share this morning on news that an outfit called Citron Capital has well, see for yourself:

Valeant: Could this be the Pharmaceutical Enron? Citron Publishes the Smoking Gun!!CitronResearch.com‎ – 1 hour ago

Citron Publishes the Smoking Gun!! Price Target lowered to $50. Just four days ago in the world of Valeant, no one had ever heard of Philidor …

Valeant halted in heavy trading, down 28%, after Citron research reportCNBC.com‎ – 44 mins ago

Valeant Shares Plummet as Citron Examines Specialty PharmacyBloomberg‎ – 16 hours ago

Last week, I had simply dug into Valeant after discussing my well-established theory that pricing for treatments, drugs and medical equipment is about to be heavily scrutinized and I saw that Valeant specifically had been subpoenaed by Congress about this topic. Upon doing my homework on the stock and the company I got more bearish about the company’s potential and I shorted a small number of shares, not nearly as many as I wish I had. I didn’t get a chance to buy puts as the stock has literally been heading straight down since I published Trade Alert: New biotech/drug/health care short and I just had no idea that it would crash this hard this fast:

I make a lot of mistakes and I’m not going to bet my ranch that biotech and Valeant in particular have topped. But I do think we’ve got a good opportunity to help hedge our broader long growth portfolio with some shorts and puts as the sector could very well be headed for trouble in coming months and years.

I’ll continue to dig more on Valeant and its financials and prospects, but I want to go ahead and get started on a new short position in this name here around $177 per share and plan on adding to this short in coming days and weeks.

At any rate, I think it’s probably time to cover at least a few shares, maybe 1/2 of what is a small position anyway, and lock in these 40% profits over three trading days. I’ll let you guys know if I do short more of this stock again and/or if I do buy puts at some point. Rock on.

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