Last Friday, Biogen (BIIB) was crushed after reporting a subpar quarter and lowering guidance for the rest of the year. What followed was an absolute disaster, with the stock falling almost $60 to $326 and then another $26 to close around $300.
Overdone? Let's look at the chart.
I've highlighted the gap with a green box that has a floor at $326. The stock is still a few bucks below that level, so resistance remains intact. But if the bulls start pushing Biogen above Friday's open and into the gap, the stock could see a nice retracement.
I am not "predicting" that the gap will be filled. Oh, it might be...or not. I have seen many hapless technicians claim that all gaps are filled. They aren't. But this stock is still deeply oversold and the fact that it is advancing and closing above the open for the past couple of days reveals that buyers are becoming a bit more confident. Volume remains much lower than Friday/Monday, but that's to be expected after the kind of institutional vomiting we saw on Friday.
I'd suggest selling some far out-of-the-money puts -- perhaps an August 280/290 put credit spread. The reward is modest, but the probability for a profit is quite high. Some in-the-money calls can also work. Lastly, you could always do the obvious -- just buy the stock.
I think that $300 will hold. That was a true "panic low" that's not likely to be revisited.
