Until Proven Otherwise, Sticking with Emergent BioSolutions

We said in our weekly missive we want to buy the best charts on buybacks and Emergent BioSolutions (EBS) is giving us a nice opportunity to add at the 20 day moving average (around $23.70). I am going to do so, but give a very large caveat that the stock is having trouble getting past $26. So after being the #1 stock of 2008 in terms of performance, the stock might finally be hitting a wall. But until proven otherwise, we'll stick with it.

Looking out farther in the chart, $21 is the 50 day moving average which has been a line in the sand the stock has not fallen through except on a few of those S&P down 8% type of days. If the stock falls to that level, I'll (a) load up in larger scale... and then (b) if it breaks $21 to the downside we'll head to the exits as the chart will be "broken". But it's been "correct" to buy EBS on every dip for 5 months so until the pattern changes, we keep going with the pattern.

Increasing EBS exposure from 2.3% to a 3.4% stake, adding in the $23.50s. These replace the shares sold on Dec 22nd at $26.16; or a 10% reduction in cost base in a week on this batch of shares. Again, I'd like to stress there could be trouble ahead due to the failure to break through $26.

This is in the context of a portfolio flush with cash and in which I just sold off nearly 2% of long exposure... need to maintain some long exposure in names that have acted the best.

Disclosure: Long Emergent BioSolutions in fund and personal account