TARO manufactures, markets and distributes OTC and prescription pharmaceuticals primarily in the Unites States,Canada and Israel, offering topical corticosteroids and antifungal cream products. For the FY ended 12/31/00, net sales rose 24% to $103.8M. Net income increased 81% to $10M. Revenues reflect the introduction of new products. Earnings also benefitted from increases in gross margins due to improved manufacturing efficiencies.

April 10, 2001

Taro Pharmaceutical markets and distributes prescription and OTC pharmaceutical products. The company’s main focus has been the off-patent dermatological market, but recent FDA approval on its generic drug for cardiac arrhythmias has got investors on a buying spree. Also adding interest to the rally has been the potential for the company to split its stock. Currently, TARO has 10.71 million shares outstanding and 50 million authorized, well enough for a 2:1 stock split. Although the company has never split its stock before, the recent run to all time highs looks promising. Moving to the chart, the stock is clearly on a breakout now that higher levels are being confirmed by an expansion in volume. On Tuesday, TARO soared to a new 52-week high of $50.50 on good volume of 203,400 shares traded. A move above this level in the upcoming week could be a good signal for traders to place their orders. Support will likely reside at the 5-dma of 47.64. TARO’s strong uptrend is bolstered by good technical readings in the MACD and OBV indicators, which suggests that a sustainable move is possible. We’ll look for potential entry points to arise when TARO pushes though $50.50 on daily volume above the three-month average of 144,400 shares. We’ll set our stops at $44 for downside protection.

Picked on April 10th@ $49.45
Change since picked 0.00
Stop Loss @ $44.00

April 24, 2001

Taro traded lower yesterday to hit our tightened stop at $53.00. We were fortunate this happen because today Taro was thoroughly routed in a fit of profit-taking that took the stock down to $44.03 a share. In case you have been wondering why we keep our stop losses so tight, look no further than Taro.

Picked on April 10th @ $49.45
Profit/Loss +3.55 ( 7%) (Stopped Monday @ $53.00)
Best Profit +6.55 (13%)

April 22, 2001

On Friday, Taro received some welcome news from the U.S. Food and Drug Administration. The FDA tentatively approved Taro’s Abbreviated New Drug Approval for Enalapril Maleate and Hydrochlorothiazide Tablets USP. Enalpril is Taro’s number one drug candidate for the treatment of hypertension. Shares of TARO traded up on the news and ended the week at yet another all time high. The stock is distancing itself from its 50-dma and is in overbought territory according to its stochastic and RSI. However, it should be noted that these indicators have remained at high levels in the past without the stock succumbing to selling pressures. Therefore, we remain encouraged by the stock’s price action but are anticipating a mild sell off soon. When and if this sell off occurs, we will expect the 10-dma, now at $49.95 to continue providing support. Resistance may come in at $56.00, Friday’s high, and then again at $57.00. The MACD remains positive and OBV keeps chugging higher as the stock continues on its northerly track. New entries could be considered on a successful test of Thursday’s low of $50.75 or a break through Friday’s high of $56.00 on volume of at least 100,000 shares by midday. We have moved our stop up to $53.00 to lock in gains should TARO decide to change course.

Picked on April 10th@ $49.45
Change since picked +5.45
Stop Loss @ $53.00