MEDI could be setting up for a big move

MEDI has been very good to us in the past, and once again it looks like it is setting up for a major move. First, let's take a look at the one-year chart of (MEDI | Quote | Chart | News | PowerRating).

Obviously, the stock is in a very nice long-term uptrend, and has recently seen an accelerating uptrend over the last month or so. Now comes the test. As you can see, MEDI is now testing its old highs in the $37.00-$38.00 range. Unfortunately, this was a pretty well-established top for the stock last fall, so moving higher from here will take some work.

One possible way to play MEDI here is through the use of a strangle or straddle spread designed to profit when MEDI moves big in either direction. You see, when a stock comes quickly toward an old resistance level like this, it is likely to either breakout quickly to the upside or bounce quickly lower. Predicting which way it will move is difficult, but because the odds favor a fast, large move in one direction or the other, a straddle/strangle spread could be extremely profitable.

We'll be watching this stock very closely in our options trading systems, especially looking for implied volatility dips that can get us into spread positions cheaply.

Andy Swan

Andy Swan created and co-founded DaytradeTeam five years ago on a principle of empowering individual stock and options traders with the techniques and analysis methods typically reserved for elite professionals. His expertise in technical analysis and commitment to educating members earned DaytradeTeam a top-ranking among advisory services for several years.