Making another run
07/12/18

Home, home on the range?

Biotech stock BioMarin Pharmaceutical’s (BMRN) certainly has seemed to feel quite at home in its range, as the following weekly chart suggests:

BioMarin Pharmaceutical (BMRN), 3/9/15 – 7/11/18. BioMarin (BMRN) weekly price chart. Trading range

Source: OptionsHouse

That’s two years of pretty much swinging between $100 and $80. But as the chart also shows, BMRN has again approached the upper reaches of that range, having mounted its biggest rally since 2015—a 32% climb from its early April lows to Tuesday’s high, when it touched $100 again intraday.

Will the fifth (or sixth) time be the charm for BMRN as it once again attempts to push above its August 2016 highs around $102.50? Well, some swing traders may understandably be anticipating another downturn and short opportunity, but breakout traders have a case to make, too:

●Instead of repeating its past pattern of spiking toward the top of the range and quickly retreating, the stock has been hanging around its current level (around $100, the highest it’s been in a year or so) for most of the past three weeks.

●Yesterday—a day when the stock rallied from being down 2% to up around 1%—options traders appeared to be busy on the bullish side of BMRN. Early in the trading session, call options volume was running more than two-and-a-half times its average pace, and call volume was outpacing put volume by around 136:1 (the morning’s ninth-strongest call/put ratio), as shown in the following LiveAction scan:

LiveAction scan: Highest call/put ratios, 7/11/18. Bullish options traders

Source: OptionsHouse

There’s been some good news on the business front, too. BioMarin, which is scheduled to release earnings on August 2, has been steadily increasing revenues over the past four years ($373.3 million for Q1 2018 vs. $146.9 million for Q4 2013) and beating revenue estimates.1 Also, in late May the company received long-sought FDA approval for its drug to treat a rare genetic disorder called phenylketonuria.2
BioMarin Pharmaceutical (BMRN), 3/1/18 – 7/11/18. BioMarin (BMRN) daily price chart. Current uptrend.

Source: OptionsHouse

Bullish traders likely will be looking for evidence the stock is serious about turning its current resistance level into future support. A daily chart (above) gives a little more perspective on the stock’s recent price dynamics. Since April BMRN has been in a clear uptrend, pushing to a series of higher highs and higher lows. Even bullish traders who expect the stock to bust out of the long-term range can’t rule out the possibility of another short-term pullback occurring first—perhaps to the zone from roughly $90-$93 where the uptrend line, the high of the brief consolidation that preceded the mid-June upsurge, and the late-June swing low all converge.

Until the stock snaps its streak of higher highs and lows, though, many traders may feel the upside breakout scenario remains in play.

Market Mover Update: Delta Airlines (DAL) fell more than 3% intraday yesterday before paring its losses later in the session. The company releases its latest earnings today.

Crude oil broke below the lower level of a nearly two-week trading range yesterday, with the August WTI futures contract (CLQ8) falling more than 5% intraday amid news that Libya had reopened several of its oil ports, and worries about the US-China tariff standoff.3

 

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1 StreetInsider.com. BioMarin Pharmaceutical Inc. (BMRN) Earnings. 7/11/18.

2 Seeking Alpha. BioMarin Keeps The FDA Approval Train Rolling. 5/29/18.

3 Bloomberg.com. Oil plunges on Libya reopening ports, trade tensions. 7/11/2018.