In a market that is trending higher and near its recent time highs, most stocks are trading at levels where the risk/reward is unfavorable to enter new long positions. During times like these, it requires a contrarian view to find bullish opportunities where the risk/reward is still favorable. One such stock that is unloved by most analysts and trading at a new 52-week low is Bristol-Myers Squibb (BMY) , but that is why I think it’s worth investigating. After declining nearly 40% over the past 12 months, BMY is starting to approach levels that should interest a long term investor. With declining sales of their generics business having eroded significant value, BMY trades at just 7 times forward earnings despite stable revenues, EPS and free cash flow. I believe that it now warrants further inspection and presents a possible bullish opportunity. BMY has in the past 2 years acquired multiple companies, and some are starting to pay off. Just last week, the FDA approved their lung cancer drug Augtyro. Additionally, multiple drugs in their pipeline that have been approved this past year are starting to see strong quarter-over-quarter sales growth. So, as analysts turn sour on BMY, I believe now is the best time to have any eye on this pharmaceutical blue chip more than a century old. And if we look at a chart of BMY, the timing signals a higher probability of a bounce. Recently the stock has continued to make lower lows in price, but momentum diverges from it and no longer confirms the new lows. This form of exhaustion is typically seen new market bottoms and can signal a potential end of its bearish trend into a bullish one. A simple way to play for a potential bounce would be to simply to buy to the Jan $49 Call Option at a $1.52 debit. This risks $152 per contract if BMY is below $49 at expiration with unlimited upside potential if BMY were to rally above its breakeven point of $50.52. DISCLOSURES: (None) 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.
