Call them steel-clad stocks.
As of Monday morning, they are:
- Regeneron, up 18% since Feb. 20;
- Gilead, up 12%;
- Campbell Soup, up nearly 7%;
- Clorox, up 4.5%;
- and Kroger, up over 3%, among a few others.
These days of volatility may not be the best time to dive into any of these stocks, according to Danielle Shay, director of options at Simpler Trading.
“Looking at the stocks, yes, they’re up. Yes, it’s because of the coronavirus. But, for me, I’m looking at it and thinking, ‘Alright, what’s going to happen in a couple months? Summer’s going to come; they’re probably going to fall back down,'” Shay told CNBC’s “Trading Nation” on Friday.
Shay suggested trading these stocks in the options market, adding that she preferred Clorox, Kroger and Campbell Soup for their stability relative to the swing-prone biotechnology names.
Put simply, delta .70 calls would give a buyer 70 cents of exposure for every $1 movement in the underlying stock and represent a cautiously bullish bet that the stock could move higher in the long term, but face some pain in the near term. Put credit spreads also express longer-term bullishness by letting traders bet on a measured rise in the underlying stock.
Craig Johnson, senior technical research analyst at Piper Sandler, said in the same “Trading Nation” interview that while he liked the strong technical charts of Regeneron and Campbell Soup, he’d wait for a pullback before buying into either.
“As I look at charts like Regeneron, you’ve had a nice long-term downtrend reversal, which you can see there on the chart, but then you look at where your overhead resistance comes into play and you might see this stock move up toward maybe 520,” Johnson said.
Regeneron was down 4.5% during the first half of Monday’s trading session, falling to just over $471 a share as the broader market plunged.
“On those kind of downtrend reversals, technically, what we often see happen is a reversal, a pullback, and a retest and then a move higher. So, your downside right now is probably 2 to 1 to the upside,” Johnson said. “And while this is a great company, I’m not sure it’s a great entry point on that stock.”
As for Campbell Soup, the technical analyst said the stock had gotten “ahead of itself” in recent weeks, particularly given its overbought conditioned, circled in the “relative strength” portion of the below chart.
“Waiting for this stock to come back makes a lot of sense from my perspective,” he said. “Again, another example of a great company, but not a great entry point on the stock to make money. So, I’d be waiting for a pullback to support on that one also.”
Shay agreed, saying that while more eager buyers could hop in now, it would be worth waiting for Campbell Soup to cool.
“I do think you could buy it, but I would like to see a pullback,” she said, pointing to the stock’s nearly 15% rise last week. “I don’t think it’s a good entry right here. But if you wanted to buy it on a short-term basis for, let’s say, the next month or two, then yes, I do think it would be a good trade.”
Campbell Soup shares were down 1% by midday Monday, just above $51 a share.
Disclosure:Â Piper Sandler is a registered market maker for Gilead.