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This morning, I am recommending a bullish trade on Repligen Corporation (NASDAQ:RGEN), the bioprocessing company.
I still think the market will continue to decline, but it is the start of a new month, which is usually a bullish time.
Furthermore, the decline in the market has now been going on for about four weeks. Typically, after five weeks of corrective action, the market will bounce back and start to perk up again. Therefore, we could be close to a short-term bottom in stocks.
Because the market could turn around, it’s good to have some bullish exposure in the portfolio. Buying a call option on RGEN is one way to prepare for short-term bullishness.
The Healthcare Sector is Finding its Footing
In April, I recommended a bullish trade on the Health Care Select Sector SPDR Fund (NYSEARCA:XLV). The XLV dropped slightly because Medicare-for-all was in the news, but I thought that selloff was premature.
If you look at a daily chart below, you can see that in late April, the XLV came up against its down-trending resistance level. This time, resistance was around $90. However, the XLV also formed solid support at around $87.
Daily Chart of the Health Care Select Sector SPDR Fund (XLV) — Chart Source: TradingView
The XLV may be struggling to make higher highs, but the fact that it established some solid support is a good sign.
As I’ve said before, given the aging demographics of the U.S., I think healthcare stocks are a great long-term bet for investors. RGEN is a particularly good stock to look at because it is outperforming the XLV.
Making Higher Highs
RGEN jumped above its 50-day moving average in the run up to its last earnings report. After it beat both revenue and earnings per share expectations, it continued to head higher.
Daily Chart of Repligen Corporation (RGEN) — Chart Source: TradingView
If you look at the daily chart for RGEN, you can see that unlike the XLV, it is making higher highs. This momentum makes RGEN a great target for a bullish play. To keep some bullish exposure in your portfolio, I recommend buying a call option on RGEN.
Buy to open the Repligen Corporation (RGEN) Aug. 16th $80 Calls (RGEN190816C00080000) at $1.80 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.