Signal Says Take Profits on This Pharma Stock

ICPT stock could be on the cusp of a short-term pullback, if history is any guide

by Andrea Kramer

Published on Dec 14, 2018 at 10:40 AM
Updated on Dec 20, 2018 at 3:18 PM

Intercept Pharmaceuticals Inc (NASDAQ:ICPT) stock has handily outperformed the broader equities market in 2018, up 83% year-to-date. However, the shares of ICPT recently flashed what's been a historical sell signal, suggesting now may be time for bulls to take profits -- or perhaps pick up some short-term options insurance.

Specifically, the drug stock is back within one standard deviation of its 160-week moving average, after a lengthy stretch below this trendline. There have been just three signals of this kind in the past, after which ICPT stock was lower three months later each time, averaging a loss of more than 13%, per data from Schaeffer's Senior Quantitative Analyst Rocky White. From the equity's current perch around $106.12, a similar pullback would put ICPT around $92.32.

Further, after more than doubling off its Feb. 9 low of $51.05, the pharmaceuticals stock is staring up at a familiar roadblock in the $120-$130 neighborhood. This area has acted as a ceiling for ICPT since late 2016, and the December 120 strike is home to peak call open interest in the front-month series, which could translate into an added options-related speed bump in the near term.

ICPT stock chart dec 14

Should the stock once again backpedal, several analysts could be caught off-guard. Intercept Pharmaceuticals boasts eight "strong buys" and one "buy" rating, compared to three lukewarm "holds" and just one "sell."

ICPT shareholders concerned about a short-term pullback could consider protective puts on the equity. The January 100 put, for instance, is currently asked at $7.30. Buying the puts to open would allow the shareholders to sell ICPT at $100 -- and likely lock in profits -- should the security take a tumble beneath the century mark before the options expire on Friday, Jan. 18.

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