$DRG, the NYSE Pharmaceutical Index is finding renewed strength after a six week downtrend. The index broke downtrend resistance today around the $500 area. That came with follow through of my MACD 9/20/9 crossover plus strength versus S&P 500 ($SPX). This for me is a strong bullish signal so I decided to take a closer look.
$DRG could find overhead resistance not too far ahead from $503 to $505. From there next resistance is between $510 and $512.60 before setting new highs.
$DRG has also recaptured the 10, 20 and 50 daily moving averages though the 10-period remains below the 20-period. Both are sloping up. Pivot point is at $500.58 while R1 pivot support is at $513.77 this week.
In addition, the $DRG/$SPX ratio is turning positve with both 9-period and 20-period EMA’s now sloping upwards. On the chart below we are also getting the MACD crossover I like to see in bullish charts.
All this looks very good so I took a look at the components within. Equities listed below are only listed in alphabetical order.
Actavis, Inc (ACT)
ACT is trading in a downward trend channel very similar to $DRG coming just shy of trendline resistance breakout today. I’d like to see the 9-period EMA get back above the 20-period but on trendline break I would make an exception. Resistance points above are the 50-period moving average near $207 and sloped positive, pivot resistance and minor price resistance near $210.50.
The biggest option trade today on ACT was May 14 calls at $220. One buyer bought 100 contracts at the bid of $1.60. This is a $160,000 bet that ACT will close above $221.60 by expiry May 23.
103 August 14 $210 calls were traded at $11.40 with a bid x ask spread of $11.20 to $12.00. 50 Aug 14 150 puts traded at $1.89. Of the May contracts, $210 calls have the highest open interest near 5,500 but only 100 contracts traded today. BxA spreads are 3.90×4.30 on close.
ACT reports earnings pre-market next Wednesday, April 30.
Bristol Myers Squibb Co (BMY)
BMY also is attempting to break a multi-week downtrend and may have done so on the close today at $50.51. Follow-through tomorrow would confirm. The MA alignment is all kinds of jacked up with the 20 and 50-period SMA”s huddled just under pivot resistance in addition to possible pricre resistance between $52 and $52.77. Continuation tomorrow with stops at today’s close should yield sufficient risk/reward.
May 14 $55 calls saw the most action today with 4,852 contracts traded leaving an OI of 5,620. The $50 calls maintain the highest OI however at 8,405. Highest OI on the put side would belong to the $50 strike with 8,705. However, by far the volume activity was confined to the $52.50 and $55 calls.
BMY reports earnings April 29 before market open.
Eli Lily & Company (LLY)
LLY broke short term resistance to a new high today closing at $60.86 just $0.03 off the high set in the last five minutes of trading. LLY has great moving-average alignment for both sets of 9-20 EMA’s and 10-20-50-100 SMA’s. The one minor concern is the close came just over the upper Bollinger Band (20, 2.0) so LLY will need some considerable momentum to stretch volatility. LLY has done this twice this year alone first in mid January and again in mid February leaving a still-open 2.4% gap.
On the option front, 3,094 calls were traded today versus 1,430 puts. Most notable was 172 Jul 14 $60 calls purchased at the ask of $2.14. Ninety-eight Oct 14 puts were sold on a BxA of $2.18x$2.18. May 14 $60 calls have the highest open interest of 10,743 while puts are significantly outnumbered with OI greated on the same expiry and strike. Implied volatility on calls is at 63% with a 52-week high of 148% and a low of 31%.
LLY reports earnings pre-market this Thursday, April 24.
Novo Nordisk (NVO)
NVO is another one of those on the edge of breaking a multi-week downtrend channel. At a $44.54 close NVO seems to want to test next resistance near $45.50. Pivot resistance is right above. The chart is not as clean as LLY with misalignment on the ten, 20 and 50-period moving averages plus the 9-period and 20-period EMA’s inverted. But my MACD is bullish which warrants a spot in the bullish watchlist.
May 14 $81 calls have an OI of 1,491 versus 1,016 May$77 puts; those were trading between $0.12 and $0.22 at the close while the calls were on a $2.88x$3.10 BxA. Call to put ratio was over 2:1 with 1,778 calls traded today versus 869 puts.
NOV reports earnings pre-market April 28.