Biotech stocks could be on the verge of a major move after trading in a tight for much of May. The iShares Nasdaq Biotechnology ETF (IBB) closed below its 100-day moving average on Friday with near-term support at $288-$287.50 holding. These levels have been holding since late February, for the most part, with stretch to $285. A close below $285-$283.75 and the 200-day moving average would be a bearish development. Resistance is at $290-$292 and the 50-day moving average would be a bullish sign.
Although there are some bullish setups in the sector, I'm looking at shares of Mylan (MYL) as a possible bearish play following the recent death-cross that formed earlier this month. The 50-day moving average has now fallen below both the 100/200-day moving averages with $39.50-$39 serving as near-term support. Last week's strength carried shares towards resistance and the $39.75-$40 level.
The MYL July 37.50 puts (MYL170721P00037500, $0.75, down $0.05) can be targeted targeted by bearish traders if shares fall below $39 over the near-term. These options would double from current levels if shares make a backtest to $36, technically, by July 20th.
If shares clear $40.50-$40.75, bullish traders can use the MYL July 42.50 calls (MYL170721C00042500, $0.65, down $0.05) on a possible trend reversal. Regular MYL June and MYL weekly options are also available to trade but these options would give the trade an extra five weeks to play out.