Seasonal cycles make this healthcare company a buy. Our second recommendation is profit-taking on a previous idea.
Buy: Illumina, Inc. (ILMN)
From Schaeffer’s Investment Research
If recent history is any indicator, bullish stock and options traders may want to consider this biotech. According to data from Schaeffer’s Senior Quantitative Analyst Rocky White, two healthcare stocks tend to outperform in the month of June, going back 10 years: genetic analysis provider Illumina, Inc. (ILMN).
White looked at S&P 500 Index (SPX) components that have traded at least eight years, with ILMN topping the list. Illumina stock has averaged the best monthly return of all SPX components, tacking on a healthy 6.52%. Plus, ILMN has ended June higher 80% of the time over the past 10 years.
Illumina shares have added nearly 38% in 2017, thanks to a massive mid-January bull gap, stemming from the company’s earnings forecast and new genetic sequencing platform. However, earlier this month, ILMN stock ran into a familiar wall in the $185-$190 neighborhood, which capped the stock’s advances in mid-2016. This region also limited ILMN’s momentum in late 2015.
An unwinding of pessimism could certainly help ILMN extend its journey higher and barrel through resistance. Short interest on the stock represents a week’s worth of pent-up buying demand, at ILMN’s average pace of trading. Meanwhile, eight out of 18 analysts maintain “hold” or “strong sell” opinions of the shares, leaving the door open for potential upgrades to lure more buyers to the table.
For options traders hoping ILMN once again outperforms in June, its short-term contracts are very attractively priced right now; the stock’s Schaeffer’s Volatility Index (SVI) of 24% is at an annual low. Likewise, its Schaeffer’s Volatility Scorecard (SVS) of 67 indicates Illumina stock has exceeded options traders’ volatility expectations during the past year.
Bernie Schaeffer, Schaeffer’s Investment Research, www.SchaeffersResearch.com, 800-327-8833, May 30, 2017