I’m debating selling puts on Celgene Corporation (CELG). Jim Cramer listed it as one he likes during Mad Money on Thursday. Schaeffersresearch.com rates CELG 7 out of 10. Usually that combination is enough for me to take a chance, but the chart looks like it could take a dip before rebounding.
Before going to the stock chart for CELG, I reviewed some of the fundamentals:
- Trailing p/e: 336.99
- Forward p/e: 34.65
- PEG: 1.29
That’s a huge expectation for improvement. Most analysts’ estimates seem to think it’s a reasonable expectation although the average rating is hold. Earnings momentum is strong, but they’ve been known to disappoint.
Looking at the chart, you really have to wonder if it’s going to be the long term or short term trend that’s going to carry it for the next two months (I’m eyeing the June options expiration). You can see on the chart below that the long term trend is pretty good, but could fall back to its lower trend line before heading back up. If you look longer term, CELG is only half-way up its climb to the upper trend line.
I have a limit in to sell a June 55 put at 1.80, but will change that to a June 60 around 2.50 if I see CELG making a turn up or if it holds support on the last trend line I drew going just under today’s price. Even at current prices, the June 55 at 1.10 gives a 12% return, without using margin. I just want more, but might not hold out too long since I think the June 55 is pretty safe considering everything I’ve said above.
Click on the thumbnail to see the full chart:
