Jazz Pharmaceuticals (JAZZ) is starting to look interesting on the buy side -- at least as long as we limit our risk! Let's look at the setup, starting with the daily chart.
I've been stalking two areas of support in this one. The first zone comes in between $127.23 and $131.25, and it includes the confluence of at least five Fibonacci price relationships within a relatively tight range. The second zone comes in between $122.41 and $124.03.
The share price is currently above the 200-day simple moving average, though it does not have the support of the 50-day SMA, nor has its five-day exponential moving average crossed above the 13-day EMA. Still, as long as we have time and price on our side, we can still look at a relatively low-risk bet against Jazz Pharma's recent low.
Besides the price axis of the market, there had also been a nice confluence of time relationships that came due between March 27 and April 1 -- yesterday -- for a possible low. When I see a cluster of time cycles, it tells me to watch for a reversal into them -- and, since Jazz Pharma was trading lower into the beginning of those cycles, I knew the odds were higher than usual for the possible start of a upside reversal.
Given the recent declines we've seen in some key stocks recently, I prefer to not step in front of the proverbial freight train. That is, I prefer to see if there are some further indications that it's worth placing a bet.
This is why I wait for a trigger -- and, in the case of Jazz Pharma, we have already seen the pattern shift to a bullish one on a 30-minute chart. In addition to that, the eight-day EMA has crossed above the 34-day line, which I like to see before I'll jump into a trade. At this point, I'm looking at a buy entry on a pullback to the most recent low, which the stock hit on March 27.
On the 15-minute chart above, I've identified the pertinent pullback zone. In general, when I look at a pullback after the stock has put in its initial trigger, I look for an entry zone anywhere between the 50% and 0.786 retracements back to the recent lows. I'll be watching this area today -- which, for this stock, means $133.88 to $137.52.
For this stock in particular, I will consider a bullish options strategy, and my maximum risk will be defined below the $130.61 swing low. The potential upside target is around $189.11. The hurdles on the way up will be at $149.92 and $159.03.
Since our trades don't always make targets, I like to move to a breakeven stop-loss when it makes sense to do so. Let's see if Jazz can hold up!
Please refer here for more information on trade triggers.
See here for general guidance on Fibonacci trade setups.