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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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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