It is a beautiful Monday Morning and I as usual, I am excited about the possibilities that this week holds for option traders. U.S. equity markets are closed today for President’s day; nonetheless, I want to intimate you with a stock whose call options you must buy as soon as markets open tomorrow.
Once the trading day starts tomorrow, you should consider buying the options of GlaxoSmithKline Plc. (ADR) (NYSE:GSK). GlaxoSmithKline with its market capitalization of $116.19B is global healthcare group, which is engaged in the creation and discovery, development, manufacture and marketing of pharmaceutical products, including vaccines, over-the-counter (OTC) medicines and health-related consumer products.
Why Shares of GSK Are Cruising
GSK has not had an impressive performance in the last one year, having lost about 14.2% in its share price within that period. However, the stock seems to have recovered its bullish momentum as it recorded a 4.81% gain in the last three months and an 11.72% gain in the last one month. GlaxoSmithKline gained an impressive 4.33% last Friday to close at $47.96, in fact, GlaxoSmithKline was one of the top gainers in U.S equity markets last week.
The gains being recorded in the shares of GlaxoSmithKline in the last couple of weeks can be linked to the decent Q4 2014 results that the company posted on February 4. Highlights of the fourth quarter results are presented below:
The company posted earnings of $0.86 per share to meet the company’s guidance and the consensus estimate of $0.86 per share. The company delivered beyond expectation on revenue with revenues of $9.9B to beat the consensus estimate of $9.5B.
The company’s revenues grew positively in emerging markets, up 5%, Japan up 1% and HiVV up 15%. The company also reports an exceptional performance outside its respiratory segment as HIV segment continues to gain traction with a combined sales of Tivicay and Triumeq reaching. £340 million.
Catching a New Bullish Wave on GSK
GSK is still dealing with the incursion of generic drugs into its market share in the respiratory niche for its Advair. In addition, the company has had a tough time weathering the storm of the huge fines it had to pay for the bribery accusations that surfaced in China. Nonetheless, it appears that the worse is over for the bullish investors can lock in great entry points on the stock at a huge discount by using call options.
The technical analysis below provides an insight into why shares of GSK might be preparing for an inevitable comeback.
The chart above shows how the shares of GlaxoSmithKline have traded in the last one year. The stock had a $41support level that held in mid-October 2014 and earlier in January this year (red line and purple circles). The support levels are also indicative of a double bottom chart pattern. The stock has also has a $47 resistance point that in mind September 2014 and early December 2014 (green line, green circles).
However, the stock’s current trading price of $47.94 suggests that shares of GlaxoSmithKline now have a potential breakout above the $47 resistance point. If the stock should close above $50 in the next three sessions, we can confidently say that GSK has a breakout and we can expect the stock to head towards its 52-week high of $56.73.
How to Trade GSK Options
A breakout is enough reason to be optimistic about the prospects of GlaxoSmithKline and I recommend that you buy GSK call options. I am particularly interested in buying the GSK May 2015 50.000 call (GSK150515C00050000) at an asking price of $0.51.
— Daily Option Alerts