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Trade of the Day: Amerisource Bergen Corp. (ABC)

ABC has the right stuff to keep this rally going


ABC performance chart
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AmerisourceBergen Corp.
(NYSE:ABC) is a drug distribution company that has blasted higher by nearly 40% from November until now, and then tumbled after the company’s latest earnings report, in which income was a bit softer than expected. I’m seeing the opportunity for a call options trade since ABC’s growth shows no sign of slowing.

It has consolidated a sprawling industry, offering pharmacy automation, inventory management, reimbursement and pharmaceutical consulting, staffing, logistics, and pharmacy management services to health-care providers and pharmaceutical manufacturers. It also provides automated pharmacy-dispensing equipment, medication- and supply-dispensing cabinets, and supply-management software to retail and institutional health-care providers.

There is a lot of buzz in the market that staples and health-care stocks are cooked — but when you look at ABC, you can see that buyers have come right back on this reset.

Currently the stock is near its 52-day moving average, but I think it still has some room to move up.

Recommendation: Buy ABC June $50 calls (currently trading around $4.80) for a $6.85 target.

InvestorPlace advisor Jon Markman operates the investment firm Markman Capital Insight. He also writes a daily swing trading newsletter, Trader’s Advantage, which aims to capture profits of 15% to 40% and often as much at 100% to 200% in less than 90 days. 

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