Bookkeeping: Adding to Emergent BioSolutions (EBS)

Emergent was one of the generals we had in January (and prior) who has done nothing the past month as student body left rotates into the Tech/China/commodity plays. Unlike the other "generals" (previous leaders of the market) it has been not riddled with bullet holes the past few weeks - it had simply been taken back to the woodshed and blindfolded... but no trigger was pulled. The stock has been range bound between $21 and $24, with the 50 day moving average at $22. So each time it broke below the 50 day it could have broken down and taken hits like some of our other friends but it did not. That said we had been sitting with a 0.2% stake waiting to see which way this chart would resolve. Yesterday the stock broke out of its month long range (north of $24) on decent volume. Today it is holding up there near $25.

In a bull market I'd pile into this sort of formation with guns ablazing - it's quite bullish on the surface and exactly the type of thing a trend trader with intermediate time frames (weeks/a few months) would want to see. In this horrid market, an intermediate trade means "a 6 hour holding period" so I'll gingerly step up to the plate expecting to lose money within minutes since breakouts are usually sold off within a day or two... putting gobs of egg on our face. So we'll give it a try with some purchases in the $24.70s taking Emergent BioSolutions (EBS) from a 0.2% stake to 1.5% of portfolio.

I've looked at so many false breakouts since summer 2008 that it has become numbing... so I'm already preparing myself for Lucy to pull the football away from me and say "gotcha again!" Anyone with a time frame longer than "daytrader" turns out to be the sucker most of the time in this new era. If it falls back to the $23s we'll cut back and wait for the next go around.

p.s. I've also cut back my hedge on American Science & Engineering (ASEI) as its regained its 50 day moving average of $75, as the Fools at Motley seem to have only affected the price for 48 hours. As I stated when I bought it, I am ok with losing money on the insurance policy as it means my long position is going in the right direction. If ASEI starts breaking out I'll close out the short position (our insurance policy) completely. If it falls back south of $74 I'll add to the short side to get back in balance. Right now it's too early to tell.

Long Emergent BioSolutions, American Science & Engineering in fund; no personal position