Vertex Pharmaceuticals (VRTX) is making headlines after presenting positive long-term data for its gene therapy, Casgevy. Analysts at Jefferies upgraded the stock to buy and raised their price target $550.00. VRTX has also been the subject of several other bullish research reports and positive analyst revisions from Scotiabank, Citigroup, Royal Bank of Canada, and Cantor Fitzgerald. The fundamentals of VRTX appear solid, which is why I’m looking for a bullish trade setup on the stock. Now, let’s dive into some technical signals to confirm this trade idea. I am using three technical signals to evaluate this trade: RSI (Relative Strength Index): RSI measures the strength of the current trend. For VRTX, it is indicating a solid bullish trend, with RSI making new highs since 11/19. DMI (Directional Movement Index): DMI gauges the dominant trend. While recent price action reflects bearish dominance (as indicated by the DI- line, shown in red), a potential trend reversal is signaled when DI- (red) and DI+ (green) start to converge or change direction. This is precisely what we are observing now. Support/Resistance Levels: VRTX has demonstrated strong long-term support around the $460 area. Historically, every time this support zone is breached, buyers step in to scoop up the stock. Once again, we are seeing similar activity in this region. To take a bullish trade on VRTX, I’m using a trade structure called a “bull call spread.” The trade To construct my bull call spread, I need to buy a $470 call and sell a $475 call option as a single unit. If on expiration day, VRTX is trading at or above 475, this trade can generate a 100% ROI on the money invested. With 10 contracts, this equates to risking $2500 to potentially gain $2500 Here is my exact trade setup: Buy $470 call, Jan 3rd expiry Sell $475 call, Jan 3rd expiry Cost: $250 Potential Profit: $250 -Nishant Pant Founder: https://tradingextremes.com Author: Mean Reversion Trading Youtube, Twitter: @TheMeanTrader DISCLOSURES: (Nishant has a VRTX 170-175 bull call spread expiring on 1/3/2025.) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
Wall Street is turning bullish on this biotech. How to play it with options