5 Hot Ideas for Trading This Pharma

07/31/2012 8:00 am EST

Focus: STOCKS

Greg Harmon of Dragonfly Capital outlines five trading ideas on Bristol Myers Squibb.

Bristol Myers Squibb (BMY) is part of the large-cap health care stocks that have been doing very well lately. It broke out of an ascending triangle in June and has retested the breakout level at 34.50 as support twice, holding both times. Now at resistance at 36.25, it still has a Measured Move higher from the triangle break to 38, and now reinforced from a channel break over 36.25.

chart

The Relative Strength Index (RSI) is bullish and rising with a Moving Average Convergence Divergence indicator (MACD) that is about to cross positive. Support is found lower under 34.50, at 33.50 and 33.00, followed by 32.20 and 31.15 before a gap to 30.74.

  • Trade Idea 1: Buy the stock on a move over 36.25 with a 75 cent trailing stop.

  • Trade Idea 2: Buy the August Monthly 36 Strike Calls on a move over 36.25. These were offered at 53 cents recently.

  • Trade Idea 3: Buy the September 36/38 Call Spread and sell the September 34 Put. This combination was offered at 45 cents recently.

  • Trade Idea 4: Buy the August/September 37 Call Calendar. This was offered at 32 cents recently.

  • Trade Idea 5: Buy the August/September 37 Call Calendar selling the September 34 Put.This was offered at 7 cents recently.

Greg Harmon can be found at Dragonfly Capital.

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