The most common question I'm getting from friends and email is what should I buy to benefit from the coronavirus?
At first glance, it sounds a bit cold, but traders and investors constantly search for opportunities. That doesn't mean you don't care, and some even hope they are wrong. Additionally, many are searching for a quick trade, not a long-term investment. Does anyone really want to make their fortune from the death and suffering of others? We won't answer that, but let's hope it is a resounding no.
With people clamoring for trade ideas surrounding the virus, it should be no surprise there are several virtually unknown small biotechs seeing speculative pops, but when a big name like Gilead Sciences (GILD) hits the headlines, it gets some serious play. It's important to note a company with a nearly $100 billion market cap won't see the same upside as some microcap biotech, but it also won't come with the potential of turning you into a bagholder.
Gilead closed just under $70 on Friday, but opened near $74 on news that a WHO team said the company's remdesivir drug is the only one with real efficacy against coronavirus. That's enough to get many traders excited, but it's one team and not the results of a trial. There are so many variables that go into that statement which makes it impossible to draw the conclusion the drug will be effective on a large scale. Once again, we're back to speculation.
Before the news, Gilead shares were trading in a wide weekly ascending triangle with a rising support level currently at $63 and resistance at $70. The gap higher this morning now creates a new support level of $70 with highs from the second half of 2018 becoming resistance at $74. If the stock can hold higher this week, then I suspect the bullish crossovers in the the Full Stochastics and Chaikan Oscillator indicators will hold providing bulls with some momentum and volume support.
Coronavirus aside, GILD looks fantastic above $70. I wouldn't use the virus as my primary reason for acquisition, but in a rough market, this appears to be one that could hold if the virus continues to spread or benefit from a strong technical pattern if the market rallies. I like the idea it can win on two fronts. While I'd like to see more growth on the fundamental side and a better forecast for 2020, it isn't what I would call expensive and offers a 4% dividend.
I wouldn't be a buyer of Gilead on the coronavirus news, I'd be a buyer because the yield and chart look pretty darn good. This stock appears to be a solid fit for a growth and income portfolio for moderate risk and above.