While Friday’s market rally may have originated from deeply oversold conditions, the bull virus has spread considerably in the past two weeks to infect a broad swath of stocks.  In fact, 77% of the S&P 500 stocks have now risen above their 50-day moving averages (hat tip Bespoke).

This surge in breadth is yet one more piece of evidence lending credence to the bullish argument.  While the broader market indices are more than a bit extended and in need of some consolidation, there still remain a number of stocks that are forming some alluring setups.

One such stock in the biotech space is Biogen Idec (NASDAQ:BIIB).  The sideways price action has set up a clean high base against the $102.50 resistance level. Volume patterns have also confirmed its bullish disposition, with expanding volume during the last two upswings and diminishing volume during the pullbacks.  If BIIB is able to muster the strength to breach $102.50, it has room to run to the next overhead resistance around $107.50.

With $0.20 to $0.30 bid/ask spreads, BIIB options are somewhat lacking in the liquidity department.  Given this wider spread, I suggest using limit orders and trying to split the spread if you’re inclined to use options.

Purchasing the BIIB Nov 100 Calls or the BIIB Nov 100-105 call option spread (where you would “Buy to Open” the Nov 100 Calls and, at the same time, “Sell to Open” the Nov 105 Calls) are two potential plays for the breakout.

The 100-strike calls are trading in the neighborhood of $8 per share ($800 per contract). If you also sell the 105 calls and initiate a spread, you could pay in the neighborhood of $3 for the trade at current prices.

Keep in mind that buying shares of stock is always a logical alternative when the options are too illiquid.

BIIB is set to report earnings on Oct. 28, so plan accordingly.

Source:  MachTrader

At the time of this writing Tyler Craig had no positions in BIIB.