Hello again and as always, I hope you’re having a beautiful Sunday! To the literal, one or two Mom’s out there that may see this, Happy Mother’s Day! I trust your kids are going above and beyond today because you, without any doubt, deserve it. Lastly, I read a post on Reddit yesterday that said, “Man up? No, Mom up cause that’s when stuff gets done”. I think that is fitting today and is certainly true as it pertains to my Mom.
With that, let’s get into today’s post. The market has been shaking off the negative sentiment to continue a slow grind higher but who knows if it will last. Additionally, I’ve been seeing multiple reports that the Fed Put is Back! True or not I don’t know, but the market has done a good job neglecting any significant down turn. Therefore, I thought it important to highlight both a bullish and bearish play for the week or weeks ahead.
Two Options Trade Ideas – Bullish Trade
Given that “stonks only go up” has been true for the lions share of my adult life we’ll start on the bullish side of the market. For that, I’ve ran my scans to uncover a potentially bullish setup in Gilead Sciences Inc. (GILD). Gilead Sciences is in the healthcare sector and most in that industry have faced increasing bearishness in our post covid world. Why that is, I’m not entirely sure. I look around and it seems like virtually every person I know has some medical need that would require the products or services offered throughout the industry.
Regardless, bearishness has prevailed and the trend looks strong to the downside. However, should you prefer the contrarian play here as I usually do then a moderate bullish sentiment may be just what the doctor ordered.
Volume has been on the upswing over the past 3 trading sessions culminating in a respectable bullish candle on Friday. Should the S&P 500 begin to show the weaknesses my spidey senses are suggesting we may see more volume flow into the healthcare sector. In this case, hopefully GILD. Moreover, price just moved above the 9 EMA which has served me well as a trigger line to accept a new directional bias. It isn’t perfect of course but does allow for some form of line in the sand with which I can make decisions.
Finally, here is a report from CNN: GILD Stock Quote & Forecast that may help to shine some additional light. As you’ll see, there are still many reasons to remain bearish on Gilead over the next week or more. Although, do take note of the positive factors at play from that report. There may just be a bull waking up.
Two Options Trade Ideas – Bearish Trade
I’m going to maintain a focus on the Healthcare industry here and consider Moderna, Inc. (MRNA) as a potentially bearish play. Honestly, I haven’t the slightest clue what lies ahead for this industry. I don’t focus on it above any other, I just found it curious that my bullish scan found GILD and my bearish scan returned MRNA. Additionally, would be really interesting to see both of these plays perform as indicated but we’ll know more in the near future.
Mostly, MRNA has experienced an uptrend through the year as they fought off some bearishness early in 2024. Though, for the year they’re essentially flat unless you bought near the lows in February in which case you’d have enjoyed a very bullish ride to date.
In any case, looking at the chart we can see a similar trend with regard to volume. Over the past 3 trading sessions volume has increased but this time price culminated in a definitive bearish candle. Yes, the exact opposite of GILD above. Sure each company is unique but in this highly correlated market I just can’t shake the interesting divergence between the two stocks that should, in my amateur opinion, be more closely aligned.
MRNA has just crossed strongly below the 9 EMA signaling at least the possibility of a new bearish period. Though, the market generally has an outsized impact on individual stocks. Should the sentiment remain bullish that could negatively impact the bearishness I’m seeing here, at least in the near term.
Lastly, here is the same report from CNN: MRNA Stock Quote & Forecast for those interested at a closer look. You’ll notice the score does seem to agree with my sentiment, or my scan, for Moderna in the near future. Only time will tell but generally speaking, when a duck walks like a duck, quacks like a duck, and waddles like a duck, it’s definitely NOT a chicken.
Closing Thoughts
First, you’ll notice I didn’t actually highlight any option trades in this post. This was done intentionally to avoid misleading anyone into a specific options strategy. I typically prefer to take these trades using one of the four variations of a vertical spread. However, there are probably hundreds of ways to play it and it just doesn’t make sense to suggest anything specific. I’ve done that before and there hasn’t been any indication as to it’s effectiveness for most readers.
That said, I wouldn’t view this sub-par analysis as anything longer term. Rather, just an indication from the signals I choose to use that both MRNA and GILD are at a point where price could deviate from the prevailing trend. If you’re a contrarian then both plays could make sense. If you’re of the view that “stonks only go up” then you may want to flip bullish on MRNA. Finally, should you prefer to avoid single assets, you may also enjoy having a look at a recent post I wrote, “Top 10 List of ETF’s with an Options Strategy”. The assets there provide a more hands-off opportunity to earn options income.
In either case, one thing we can all agree on is that these two stocks will move one way or another in the coming weeks.
Until next week…
God bless and Take care,
Jeff
