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I am recommending a bearish trade on AxoGen Inc. (NASDAQ:AXGN), a company that provides surgical products and education to help improve surgical treatment algorithms for peripheral nerve injuries.
I said a few weeks ago that health care is one of the best sectors to be in, but the technical picture on this stock makes it an exception. AXGN simply rallied too hard and too fast.
From August of 2014 until the peak in July 2018, the stock rose over 2,600%. And from February to July of this year, AXGN jumped more than 140% — in just five months.
Since that peak above $56 per share, AXGN stock has lost 45% of its value, and the chart is pointing to new lows in the intermediate term.
After falling below support in the $31-$32 range last Monday, AXGN found a secondary support level near $27 on Tuesday, which held and sparked a three-day rally that took shares right back up to $31.
Daily Chart of AxoGen, Inc. (AXGN) — Chart Source: TradingView
But that level is now going to act as strong resistance, as you can see in the chart above.
I’m expecting that resistance will hold and send the stock lower. My initial target to the downside is $27, but a break below that level should have the shares eventually testing the next level of support just above $24.
If that move materializes before the end of the year, today’s recommendation should return a fantastic profit.
Buy to open the AxoGen, Inc. (AXGN) Jan (2019) 25 Puts (AXGN190118P00025000) at $1.00 or lower.
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InvestorPlace advisor Ken Trester brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.
