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Trader bets Trump all talk on drug pricing, buys Pfizer on the dip

Health-care stocks sat out the Trump rally Wednesday, but one technician says a rebound could be on the horizon for one of the biggest names in the sector: Pfizer.

Pfizer was one of many biotech and health-care stocks that dropped after Time magazine's "Person of the Year" piece on Donald Trump quoted the president-elect's vow to cut drug prices. This, along with a $107 million fine from the U.K.'s top antitrust regulator, pulled Pfizer down more than 1 percent during Wednesday trading and took the stock back to early November levels.

But Andrew Keene of AlphaShark says that from a technical standpoint, Pfizer looks like it's going to recover. On a chart of Pfizer, Keene says that the stock has fallen back to what he has deemed "massive support" at $30, last seen pre-election. Since the $30 acts as support, Keene believes that Pfizer can rise from there to hit another key technical marker.

"I think it can spike up to that 150-week moving average, which is known as a smoothing mechanism level of resistance at $34," Keene said Wednesday on CNBC's "Trading Nation."

In other words, the trader sees Pfizer up about 9 percent in the next few months and returning to its levels in early October. Since hitting a year-to-date high in August, the pharma giant has plunged more than 16 percent.


Keene is predicting that the 9 percent rally he sees coming for Pfizer will materialize in March. As a result, he is looking to buy the March 33-strike calls and sell the May 34-strike calls to make a "bull call spread" for 20 cents debit, or $20 per options spread.

For Keene to break even on the trade, Pfizer would have to close at $33.20 on March expiration. If Pfizer closes below that level on the expiration date, Keene would lose the $20 he paid to make the trade. But if Pfizer were to close above the $34 that the trader believes it can reach, he would see a big reward.

"I could quintuple my money on this trade — it can go to $1," explained Keene. "I think it's a great trade [with] a great reward-to-risk setup."

Pfizer is still up 2 percent in the past month, but the summer breakdown in biotech stocks has made it so that the pharma company is more than 3 percent lower year to date.

Trader Takeaway: Andrew Keene sees Pfizer rallying 9 percent to $34 in March, so he's buying the March 33/34 bull call spared for $0.20, or $20 per options spread.


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Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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