Shares of the drug developers tend to rally in the June-August period
Drug stocks are making waves today, as traders digest cancer treatment updates from the American Society of Clinical Oncology (ASCO) conference. The shares of Celgene Corporation (NASDAQ:CELG) partner bluebird bio (BLUE) are higher after the company's myeloma treatment update -- and history suggests CELG stock could rebound over the next few months, too. Likewise, fellow biotech stock Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) could outperform this summer, if past is prologue.
CELG Options Players Predict a Pop
Since notching a record high of $147.17 in early October, it's been downhill for Celgene stock. A pair of bear gaps later that month sent CELG shares reeling, the security touching a four-year low of $74.13 -- almost half the aforementioned high -- on May 21, after another Celgene executive was poached by a rival. Today, CELG stock is down 0.1% to trade at $78.97, despite CEO Mark Alles' upbeat comments on the firm's CAR-T cell therapy and "rich" pipeline of drugs.
However, it should be noted that CELG tends to rally from June through August. Over the past 10 years, the pharma stock has ended this period higher 80% of the time, averaging a three-month gain of 10.13%, per recent data from Schaeffer's Senior Quantiative Analyst Rocky White. A similar pop from current levels would put the security just under $87.
Options buyers have already been betting bullishly on CELG. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the stock with a 10-day call/put volume ratio of 3.84, in the 92nd percentile of its annual range. This points to a healthier-than-usual appetite for long calls over puts during the past two weeks.
ALXN: The Best Stock to Own in Summer
Moving on, Alexion Pharmaceuticals has been the best stock to own in summer, historically. ALXN is the only S&P 500 Index member that boasts a 90% win rate from June through August, looking back 10 years. What's more, the equity has racked up the highest average three-month return, too, at 14.94%.
ALXN stock was last seen 0.8% higher to trade at $120.02. Another 14.94% rally would place the shares around $138 -- above their mid-March highs that stemmed from upbeat data on the firm's rare blood disorder treatment. A surge of that magnitude would also lift Alexion stock above its 40-week moving average, which has stifled most rally attempts in 2018, and north of the $129 area -- a roughly 38.2% Fibonacci retracement of ALXN's rally from its mid-2017 lows to its annual high in early September.
Another summer uptrend for ALXN could shake loose quite a few option bears. The equity's 10-day put/call volume ratio on the ISE, CBOE, and PHLX sits at 6.09 -- at the very top of its annual range, pointing to accelerated put buying over call buying of late. In fact, over 4,200 Alexion put options have been purchased in the past two weeks, compared to fewer than 700 calls. An unwinding of pessimism in the options pits could add fuel to the stock's fire.