A Gift-Wrapped Buy Entry

 | Jan 17, 2014 | 7:00 AM EST  | Comments
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regn

When I look at the technicals in biotech Regeron Pharma (REGN), the numbers all add up to a buy for me.

First, the share price is both above the 200-day and 50-day simple moving averages. Addition, the five-day exponential moving average is above the 13-day EMA on the daily chart -- another metric that essentially puts the stock in buy mode. Beyond the support from moving averages, Regeron recently enjoyed an upside breakout when it cleared the Dec. 23 high. This suggests the stock may head toward a bigger-picture upside target around $336.73.

Better yet, even after that breakout, the stock is now conveniently providing us with a pullback for an entry. When it comes to your buy entries, the way to keep the edge is to wait for such a pullback -- and now we have one. Aside from all this, I also see some time "symmetry" evident at the stock's last low. If you'll notice, the last two declines both lasted exactly 12 trading days.

Regeron (REGN) -- Daily
Source: Dynamic Trader

Like I said: For me, all of this adds up to a buy on this pullback. It also doesn't hurt that some of the other biotechs have been on fire lately.

I'm showing possible support anywhere from the $275 to the $286, and I've already seen some short-term buy triggers. Typically when I'm using an options strategy, I will look at a $5 or $10 wide call debit spread, or if it makes more sense I will consider selling credit spreads against that support.

Bottom line: As long as the price continues to hold above the Jan. 10 low, I'll remain interested in the buy side in Regeron. Again, in the bigger picture, the upside potential shows the possibility of the $336 area, and then maybe $358 -- and there will be some other minor targets that I'll discuss as the move unfolds.

If the Jan. 10 low is taken out, of course, I will have to consider myself wrong in this trade. I have to say, though -- the risk-reward scenario on this one is pretty good.

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