Geron Options Trading Explodes as Stock Flirts With Key Level

Geron options traders are going wild as the stock surges 20%

Alex Eppstein
Apr 10, 2017 at 2:06 PM
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Drug stocks are going wild today. Among the names making major moves is Geron Corporation (NASDAQ:GERN), last seen 20% higher at $2.58 after partner Johnson & Johnson (NYSE:JNJ) provided positive trial updates on Imerge and Imbark. Meanwhile, on the charts, GERN shares are at a critical juncture, positioned just below a key Fibonacci retracement level:

geron stock chart today fibonacci retracements

As you can see above, GERN stock is perched just below the 23.6% Fibonacci retracement of its late-2015 high and late-2016 low. Earlier, the shares were above this level for the first time since a September 2016 bear gap. Notably, the 23.6% retracement level is in the $2.60-$2.70 area, which served as a key layer of support for most of last year. Whether it now turns into resistance is still to be determined.

In any case, GERN has had a strong run in 2017, advancing nearly 25%. In the process, the shares have hurdled their 200-day moving average, which has repeatedly halted rallies since last September. On top of that, GERN stock is above its descending 320-day moving average, which it hasn't toppled on a closing basis in well over a year.

For contrarians, the shares could present a bullish opportunity, given an extremely pessimistic sentiment backdrop. For instance, over one-fifth of the stock's float is sold short. Based on GERN's average daily volume, it would take about a month for short sellers to cover these bearish bets, hinting at ample fuel on the sidelines.

Further tailwinds could be triggered as options bears start hitting the exits. GERN shares boast a top-heavy 10-day put/call volume ratio of 2.86 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Not only does this ratio indicate long puts nearly tripled calls, but it also ranks just 4 percentage points from a 12-month high.

Geron Corporation options are running at a feverish pace this afternoon, with nearly 8,000 contracts on the tape -- compared to an average daily volume of fewer than 1,000. The September 3 put is the most active strike, where the ISE confirms GERN options traders are both buying and selling to open positions.

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