Trade of the Day: Opko Health (OPK)

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The bulls battled back on Tuesday to get a piece of the market pie, but the bears were greedy and got the overall win. The action in the small-caps was encouraging, but further gains are needed to clear major resistance across the board. Here are the levels I’m watching for on all the majors based on Tuesday’s action:

The Dow’s close below the 50-day moving average was slightly bearish, as it keeps support at 17,900-17,800 in play. Resistance remains at 18,100-18,200.

The S&P 500 tested support at 2,100 and the 50-day moving average on the opening drop to 2,099. There is additional risk to 2,075 and the 100-day moving average on a close below 2,090. The rebound to 2,117 late in Tuesday’s session pushed resistance at 2,115-2,125 before fading. A close above these levels would be bullish.

The bears pushed the Nasdaq to a low of 5,047, but the bulls held the 5,050 level for the fifth-straight session. The rebound to resistance at 5,100 during the second half of trading was a tease, but it was good to see 5,075 hold into the close.

The Russell 2000 small caps held near-term support at 1,240 held before a mid-day run to 1,258. The 1,240 level has held up well since mid-May, and the close above the 50-day moving average was slightly bullish. However, resistance at 1,260 needs to clear before a run to new highs can be considered.

While we wait for that to happen, I want to bring you an opportunity in my favorite sector to trade: biotech. I like biotech for uncovering hidden-gem small caps, but I’m not biased against the bigger players.  Opko Health (OPK) is now an $8.4 billion market cap name I’ve been actively trading into and out for years.

A trade in late January gave my Momentum Options subscribers a 111% gain in the OPK March 11 calls, and the last time I traded OPK in late April, we netted a 130% return on the OPK June 16 calls. Given that June expirations is right around the corner, I don’t recommend jumping back into those options, but I’ve spotted another opportunity in Opko Health as shares have cracked above $18 again and are at fresh 52-week peaks.

Though there is resistance is at $19-$20, I think we could see the stock push to $20 or higher, and I like shorter-term calls at current levels to play the move.

Buy to open the OPK July 20 calls (OPK150717C00020000) at current levels. These are the regular monthly options that expire on July 17.

My exit target for the calls is $1.20, but I do not have a stop loss set for the trade at this time.

small caps OPK

Chart courtesy of Recognia

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Article printed from InvestorPlace Media, https://investorplace.com/2015/06/trade-of-the-day-opko-health-opk-smallcaps/.

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