To The Moon

I am BEARISH on $Gilead Sciences(GILD)$ at its current levels.

Here's a look at its daily chart:

The stock failed to break above 90, which was the same spot where it failed back in January 2018 - back then, it made a high of 89.54 before pulling back over 25 points. This suggests that 90 is an extremely strong historical resistance level for the stock. The stock hit the upper Bollinger Band a few days ago on the attempt to break 90, which signified the start of a short opportunity from there. Currently, it has broken the middle Bollinger Band which suggests that a strong downside move is coming in the coming days. I am inclined to lean bearish on the contracting Bollinger Bands, with increased volume on yesterday's red candle. I have plotted the fibonacci retracement levels on the chart above. Minimally, I'm looking for a downside move to 83s. Ultimately, I'm targeting the gap fill back to 70s from back in October.

That being said, the stock has been holding support at the 20DMA and the 21EMA since September. Breaking both of these likely signal the start of a pullback. I have gotten some puts expiring in February 2023, in anticipation of the gap filling by then. While there were rumblings of a merger with $AstraZeneca PLC(AZN)$ back in June 2020, those rumblings have not materialised and I expect such rumours to be insignifcant in the longer term. 

So, how do you trade this stock? You can get 85P expiring in early January (i.e. 4-5 weeks out). If you're worried about any upside move, then you can hedge with 87C that has the same expiry (smaller size as compared to puts). In other words, a strangle strategy. If the broader market bounces, it's possible that the stock might get a lift from here, however, the chart sure does look like it's going to roll over in the short term similar to $Amgen(AMGN)$ . Good luck everyone!

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