Trade of the Day: Exelixis, Inc. (EXEL)

Falling ratio of advancers to decliners lessens the bullish case

By Ken Trester, Editor, Maximum Options

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While the charts are sending bullish signals, I think we could see a slight pullback over the next week or so following the most recent bounce off of support. The S&P 500 has risen about 100 points since it touched its 200-day moving average earlier this month, and I think the most likely scenario is that we may begin to see some consolidation here.

Meanwhile, my indicators are giving bullish-to-neutral readings this week, a mild downgrade from bullish readings last week.

One reason my indicators have gone slightly neutral is that the ratio of advancing issues to declining issues is not as strong as I would like to see. Without broad-based participation from all sectors, I’m expecting more sideways action as volume dies down going into the summer months.

In this environment, I am recommending a bearish trade on a mid-cap biotech: Exelixis, Inc. (NASDAQ:EXEL).

Buy to open the EXEL Aug 19 Puts (EXEL180817P00019000) at $1.20 or lower.

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