Short Trader: Savient Bulls Take Their Medicine

Savient Pharmaceuticals (SVNT Quote), a specialty pharmaceutical company that develops, manufactures and markets a number of different drugs, has hit the bears' radar screens because of a bearish technical formation.

Two of the company's main drugs are Oxandrin and Puricase. Oxandrin is used to promote weight gain following involuntary weight loss related to medical conditions, and Puricase is used to control hyperuricemia (a high level of uric acid in the blood) in patients with symptomatic gout.

Savient is currently seeking phase III approval for Puricase, which adds risk to a short position in this stock. With most biotech and pharmaceutical companies, any approval of phase III clinical trials tends to lead to a gap up in stock price. Therefore, while the short-term technical view could prove to be a bearish signal, the day-to-day risk of getting phase III approval could increase the share price beyond the initial risk parameter. Building a position with less capital risk would be essential in this technical setup. ...