Option Trade 
Gilead Sciences, Inc. (NASDAQ:GILD) Calls Friday, June 30, 2017

** OPTION TRADE: Buy the GILD SEPT 15 2017 72.500 CALL at approximately $2.30. Place a pre-determined sell at $4.60.

Note: No protective stop losses added -- but if you wish to do so make it $0.95.

Also Note: This is a recommendation and individual members can use their own discretion as to when to enter or exit!

by Ian Harvey   

In anticipation of the announcement of the Senate Republicans’ health care bill, which should provide good news for biopharmaceutical firms, saw Gilead Sciences, Inc. (NASDAQ:GILD), a research-based biopharmaceutical company and highly profitable company, rally last week.

However, this uptrend stalled briefly as a few Senate Republicans have balked at backing the bill, forcing a delay of a vote on the bill until after the July 4 recess.

GILD had moved higher once again until Wednesday, with Thursday having a bad day for most of the market. However, since consolidation seems to be over, it is expected that GILD will continue climbing higher during the next few weeks as Republicans work to update their health care proposal, which is likely to ultimately include provisions that will help boost margins for GILD.

Based on the height of the two-day increase that sent the stock from $66 to $71 last week, we expect GILD to make another $5 move higher as it continues climbing up to resistance at $76.

Shares of the company moved 6.55% over the past five trading sessions and seen boost momentum over the last week. Looking a bit further out the stock is 11.52% for the past month and -12.62% over the past year.

Gilead Sciences has a market cap of $93.14 billion, a P/E ratio of 7.533 and a beta of 1.20. Gilead Sciences has a 12 month low of $63.76 and a 12 month high of $88.85. The firm has a 50 day moving average of $65.46 and a 200 day moving average of $69.00.

Influencing Factors to Consider

Gilead shares are currently coming off of some extremely high readings of its RSI; not seen this high in more than a year, so the profit-taking was expected.

The shares hit round-numbered resistance at $47 at the same time that GILD was extending its volatility rally deep into overbought territory.

With the 50-day moving average for Gilead shares turning higher, the stock is entering a sustainable technical rally that is likely to target $78, which is the site of Gilead shares’ 20-month moving average. A break above this will put the stock back into a long-term bull market rally for the first time since December 2015.

Analysts and Hedge Funds Opinions

Vetr upgraded shares of Gilead Sciences, Inc. from a buy rating to a strong-buy rating in a research note issued to investors on Monday morning. The firm currently has $83.66 target price on the biopharmaceutical company’s stock.

Also, several other equities analysts have recently commented on the company…..

  • BMO Capital Markets reissued a hold rating and issued a $76.00 price target (up from $75.00) on shares of Gilead Sciences in a research note on Wednesday, May 3rd.
  • Barclays PLC reissued an outperform rating and issued a $90.00 price target on shares of Gilead Sciences in a research note on Saturday, March 11th.
  • J P Morgan Chase & Co reissued an overweight rating and issued an $82.00 price target on shares of Gilead Sciences in a research note on Thursday, April 6th.
  • Credit Suisse Group reaffirmed an outperform rating and set a $79.00 target price on shares of Gilead Sciences in a research note on Monday, May 15th. Finally, Jefferies Group LLC reaffirmed a buy rating on shares of Gilead Sciences in a research note on Wednesday, March 22nd.

One investment analyst has rated the stock with a sell rating, twelve have issued a hold rating, fifteen have assigned a buy rating and two have given a strong buy rating to the stock. The company currently has an average rating of Buy and an average price target of $83.50.

Israel "Izzy" Englander, the co-founder of the Millennium Management hedge fund worth more than $5 billion, bought another 480,000 shares of Gilead Sciences stock during the first quarter of 2017. This puts the hedge fund's total stake in Gilead at nearly $129 million. In addition, Millennium bought 200,000 call options for the biotech. His take on GILD is……

1.       Its promising pipeline. Gilead recently submitted its bictegravir/emtricitabine/tenofovir alafenamide combo to the U.S. Food and Drug Administration for approval. This combo could be the biotech's next megablockbuster in treating HIV.

2.       Englander thinks that Gilead's valuation won't go much, if any, lower than it already is. The stock has fallen more than 20% in the last 12 months, with shares now trading at less than nine times expected earnings.

3.       Englander probably expects Gilead to make one or more transformative acquisitions that could rejuvenate interest in the stock. Gilead COO Kevin Young recently stated that the big biotech is "looking far and wide" at potential assets in a number of therapeutic areas.

Several other  institutional investors have recently made changes to their positions in the stock…..

  • BlackRock Inc. boosted its stake in shares of Gilead Sciences by 2,789.0% in the first quarter. BlackRock Inc. now owns 102,969,463 shares of the biopharmaceutical company’s stock worth $6,993,686,000 after buying an additional 99,405,266 shares during the last quarter.
  • Norges Bank acquired a new stake in shares of Gilead Sciences during the fourth quarter worth approximately $997,048,000. Vanguard Group Inc. boosted its stake in shares of Gilead Sciences by 7.3% in the first quarter.
  • Vanguard Group Inc. now owns 90,693,263 shares of the biopharmaceutical company’s stock worth $6,159,886,000 after buying an additional 6,197,361 shares during the last quarter.

 Harvey’s Options Volatility Indicator

Conclusion

Based on the height of the two-day increase that sent the stock from $66 to $71 last week, expect GILD to make another $5 move higher as it continues climbing up to resistance at $76.

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

** OPTION TRADE: Buy the GILD SEPT 15 2017 72.500 CALL at approximately $2.30. Place a pre-determined sell at $4.60.

Note: No protective stop losses added -- but if you wish to do so make it $0.95.

”Success is simple. Do what's right, the right way, at the right time.”

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Options traders win because they are successful.




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