While Friday�s market rally may have originated from deeply oversold conditions, the bull virus has spread considerably in the past two weeks to infect a broad swath of stocks.� In fact, 77% of the S&P 500 stocks have now risen above their 50-day moving averages (hat tip Bespoke).
This surge in breadth is yet one more piece of evidence lending credence to the bullish argument.� While the broader market indices are more than a bit extended and in need of some consolidation, there still remain a number of stocks that are forming some alluring setups.
One such stock in the biotech space is Biogen Idec (NASDAQ:BIIB).� The sideways price action has set up a clean high base against the $102.50 resistance level. Volume patterns have also confirmed its bullish disposition, with expanding volume during the last two upswings and diminishing volume during the pullbacks.� If BIIB is able to muster the strength to breach $102.50, it has room to run to the next overhead resistance around $107.50.
With $0.20 to $0.30 bid/ask spreads, BIIB options are somewhat lacking in the liquidity department.� Given this wider spread, I suggest using limit orders and trying to split the spread if you�re inclined to use options.
Purchasing the BIIB Nov 100 Calls or the BIIB Nov 100-105 call option spread (where you would �Buy to Open� the Nov 100 Calls and, at the same time, �Sell to Open� the Nov 105 Calls) are two potential plays for the breakout.
The 100-strike calls are trading in the neighborhood of $8 per share ($800 per contract). If you also sell the 105 calls and initiate a spread, you could pay in the neighborhood of $3 for the trade at current prices.
Keep in mind that buying shares of stock is always a logical alternative when the options are too illiquid.
BIIB is set to report earnings on Oct. 28, so plan accordingly.
Source:� MachTrader
At the time of this writing Tyler Craig had no positions in BIIB.�
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