It is a beautiful Boxing Day and I thought it expedient to give you a surprise present in the form of an option trade that could turn out to be incredibly profitable within the first three months of 2015. In today’s piece, we will examine the options of Novo Nordisk A/S (ADR) (NYSE:NVO). Nordisk with its market capitalization of $90.55B healthcare company headquartered in Denmark.
Novo Nordisk is engaged in the discovery, development, manufacturing and marketing of pharmaceutical products. It is engaged in diabetes care. It has a range of diabetes product portfolio, including a portfolio of modern insulins and the first human once-daily GLP-1 analog.
Nordisk is at An Important Support Level
The rationale behind my promise of potentially incredible gains in the shares of Novo Nordisk is based on the simple yet powerful concept of support and resistance levels. When a stock nears a support/resistant level, there is a high possibility that the stock will breakout or breakdown below that level based on the fundamentals of its business.
The chart above (with annotations) shows how the shares of Novo Nordisk have traded within the last one year. It does not take much research to conclude that shares of Novo Nordisk have been channeling for much of this year as shown in the area covered by the red and green lines.
You will also notice that Novo Nordisk broke through a $42 resistance in February before establishing $42 as a support level in April, May, June, October and recently this month. You will also observe that the stock has experienced a $46.8 resistance that held in June, July, August and earlier this month.
Interestingly, shares of Novo Nordisk have always bounced back to the $46.8 resistance level every time it reached the $42 support level. More so, the breakout above the $46 resistance level saw the stock reaching out to its 52-week high. Shares of Novo Nordisk have recently touched the $42 support level and the fact that the stock did not break down below the level shows that the stock is heading back towards the resistance point.
Is A Breakout Is In the Books?
Novo Nordisk is a key player in the diabetes-treatment industry with its Victoza treatment. This is especially true considering the fact that diabetes cannot yet be cured; rather, it can only be treated. According to the World Health Organization, more than 347 million people worldwide have diabetes and the number is expected to grow by to a conservative estimate of 430 million people by 2030. In addition, the United States have more than 32 million Americans suffering from diabetes and the number is expected to jump to 53 million sufferers by 2030.
Novo Nordisk has recently added another element of positivity to its business fundamentals as it received FDA approval for Saxenda as an anti-obesity indication. Saxenda is the ingredient in the already-approved Victoza (a diabetes treatment that touted weight loss as a side effect). The FDA approval received for Saxenda invariably puts Novo Nordisk in the spotlight among companies operating in the anti-obesity space.
How to Trade NVO Options
I am optimistic about the prospects of Novo Nordisk and I strongly believe that the stock would rise to the $46.8 resistance level in the next couple of months. I am particularly interested in NVO call options and the NVO Mar 2015 45.000 call (NVO150320C00045000) looks attractive at an asking price of $1.40.
— Daily Option Alerts