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6 Call Contenders: Pharmaceuticals

A new powerhouse pharma stock has emerged from this week's list.


Each week I use my Power Stocks scanner to find the best stocks for options trading. The ones that caught my attention this week had all of the qualities I look for in a call option—the potential for a big move up (volatility) based on technicals and past activity in the stock, and good liquidity. All of these are names you’ll recognize, and for good reason—options which do not have liquidity may trap you into a position, or prevent you from taking a large enough position to make the transaction worthwhile.

The following stocks have those qualities I look for. I’ll leave it up to you to decide which strike price and month are appropriate for your trading style, but be sure to give yourself enough time to be right. I’ve also included the support and volatility levels my scanner has detected for these stocks. The average level of volatility is 20.

This week, once again, big pharma stocks are emerging as the strongest, and call buyers should take note of the following names:

  • Coventry Health Care (NYSE:CVH) is offering excellent buying, with support residing at $47. While its volatility is relatively low at 10 in my system, establishing a position in the stock or looking at further-out calls should yield a nice return.
  • Eli Lilly (NYSE:LLY) is slightly more volatile, and as noted earlier remains a favorite of several traders.
  • Merck’s (NYSE:MRK) volatility rating has remained at 15 for two weeks, but my system rates it as a powerhouse. Technical support lies at $44.
  • Astrazeneca’s (NYSE:AZN) volatility rating also remains unchanged at 16 and it’s set up for a good short-term trade, but the intermediate-term and longer-term picture start to cool so be quick to take any upside profits on this name.
  • Pfizer (NYSE:PFE) is a new powerhouse name on the Power Stocks list this week, and sports a volatility rating of 14. It has a strong short-, intermediate- and long-term outlook.
  • Biogen Idec (NASDAQ:BIIB) is another powerhouse stock with the highest volatility rating of the group at 22. But be mindful and use a tight stop for any trades on BIIB, as the next support level isn’t until $177.

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