I have shares of Health Care REIT, Inc. (NYSE:HCN) on my watchlist, as crucial levels of support and resistance have come into play.

HCN stock could be on the verge of a continued slide following its recent drop below $80, but a recovery back above this level could also be in the works.

Health Care REIT stock is currently trading below its 50-day moving average just below $78. There is additional weakness to $74-$72 and the 100-day moving average on a close below $76. If HCN shares can recover and hold $77.75 – $78, a recovery above $80 and prior support could be in the mix.

Health Care REIT is scheduled to announce earnings on Feb. 20, and Wall Street is looking for a profit of $1.02 a share on revenue north of $855 million.

The high estimate is calling for a profit of $1.05 a share, with revenues topping $860 million. The low estimate is at $1.00 a share on revenue of $850 million, which could translate into a headline beat of 3 cents per share or a miss of 2 cents per share.

Health Care REIT has topped Wall Street’s estimates the past four quarters by 1 cent, 4 cents, 2 cents and 2 cents per share, respectively. This is a nice trend that I expect will continue. Revenues have also come in higher than expectations for three-straight quarters, but there was a slight miss in the year-ago period.

Health Care REIT recently announced a quarterly dividend payment of 8.25 cents per share. Shareholders love dividends, and the current annual payment is at $3.30 a share for a yield north of 4%.

The dividend has been solid for nearly 45 years, and the upcoming payment will represent Health Care REIT’s 175th consecutive quarterly payout. The checks will be cut on Feb. 20 and will be paid to shareholders that were on the books as of Feb. 10.

The ex-dividend date was on Feb. 6 and has been factored into the stock price following the 5% drop from $81.63 to $77.25 that day. The selloff was clearly overdone, with short-sellers getting their breaks below $80.

A stock usually pulls back the amount of the dividend, maybe a little more, on the ex-date, but $4.38 was absurd, which is why I like shares at current levels. However, HCN is still on shaky ground.

While it’s unclear at the moment if the stock will clear $80 or test $74 – $72, there is a way to capitalize off of the next $3 move.

The HCN March 75 puts ($1.05, down 15 cents) are an attractive alternative to a bearish position if HCN shares fall below $76. If Health Care REIT stock is below $73.95 by mid-March, the trade breaks even. At $72, the puts would nearly triple, as they would be worth at least $3 for a 186% return from current levels.

The HCN March 80 calls (90 cents, up 10 cents) can be used if shares clear $78. If HCN stock trips $82 by mid-March, these call options would be worth at least $2 for a 122% return.

Together, the two aforementioned options would create a strangle option trade and would cost about $2 at current levels.

While these types of “fancy” option trades limit the upside potential, they also provide protection and help to limit losses. Instead of thinking of them as fancy, think of them as insurance, which is a better way to describe strangle option trades.

The break-even points for the strangle option trade would occur if shares clear $82 or fall below $73 by mid-March, technically, to cover the $2 in premium paid for both the call and put option.

REITs usually provide safety in a portfolio, and this Health Care REIT has literally earned its name by being one of the best to own in the healthcare sector, as it offers the best of both worlds.

At this point, I will continue to watch shares of HCN, as a trade opportunity could be on the horizon.

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