Incyte Is Giving Reasons To Get Excited

The S&P 500 Index has a fighting chance to avoid recording its fifth straight decline as global markets shake off Turkish currency jitters. In Asia, the Nikkei carved out a 1.2% gain after a lower yen set the stage for buying action. The Shanghai Composite in China finished the day 0.1% higher and South Korea’s Kospi index edged up 0.2%. Australia’s ASX 200, Taiwan’s Taiex and New Zealand’s NZX-50 were all in positive territory as well, while Hong Kong’s Hang Seng shed 0.4%. It’s a positive session at midday in Europe as well, with the Stoxx 600 up 0.3%. Germany’s DAX is 0.5% higher to lead the way, while U.K.’s FTSE is up 0.3%. Dow futures point 0.3% higher and S&P 500 futures are up 0.5%.

Let’s consider Incyte Corporation. (Ticker: INCYWealth Strength IndexINCY is Moderately Flat and trending Down):

The VantagePoint platform recently indicated upside momentum.

Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out three significant things. We have a bullish crossover indicated by the blue predictive indicator line crossing above the black simple moving average on August 7th.  We can combine that with the VantagePoint propriety neural index indicator moving from the RED to the GREEN that same day.  This indicator measures strength and weakness for a 48-hour period, in this case strength.  The move to the GREEN position further makes the case for a potential bullish scenario. We also have the predicted high and low above yesterday’s actual high and low indicating further strength.  I want to play the VP bullish indication.

Strategy Discussion

If you are strictly a stock trader, simply buying INCYWealth Strength IndexINCY is Moderately Flat and trending Down in the $65.00 area is a prudent move.  You are anticipating a move to the upside.  It is always a good idea to enter a sell-stop order to mitigate potential losses.  Placing that sell-stop in the $64.00 will achieve that goal.

For active traders with a shorter investment time horizon, you can consider a setup utilizing options. Given the market conditions outlined above, taking an active, premium debit approach may be the best path to success.

Because of the reasons given above, the purchase of a debit call spread may be one way to approach this situation.  You will first want to calculate your target strike.  In order to do this, you will need three pieces of data:  current price, expiration date and the implied volatility associated with that expiration date.  For INCYWealth Strength IndexINCY is Moderately Flat and trending Down, that yields a target strike of ~$72.50.  You may want to consider the INCYWealth Strength IndexINCY is Moderately Flat and trending Down September 21st regular monthly expiration 70/72.5 call spread, buying it for $0.60.  The most you can lose is the premium paid and the most you can gain is the width of the spread less any premium paid.  Max risk = $0.60 and max reward = $1.90.  This means that you are getting odds of 3.17:1.

Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.