Gilead Sciences Inc. (GILD)
(7/17/07)

Drug maker GILD has had a great run since the earlier bear market lows, and has been through a few stock splits, as its share price has remained in a general uptrend.  Its recent pullback I think offers an opportunity to position for another run.  

As the daily chart suggests, the stock fell in 7-waves from a high of 42.24 on May 23, to a 38.38 low on June 29.  Because the larger historical wave pattern works nicely with this as a Wave (4) low, and given the current sentiment patterns in the stock, which are falling from a high P/C ratio, we think it may now may ready to launch a Wave (5) run.  If so, then it should fully retrace the decline from May and exceed it towards a new high, with targets at 45 and 48.70.  If correct, the stock has higher potential to 51 and 54.  I'd suggest using a solid move above 40.70 for a conservative entry.  A break below 38.38 invalidates the count, so a stop could be used a few ticks below to limit risk.

GILD has only moderate volatility, so it moves a bit on the slow side.  We're therefore using the January 2008 $40 Call (symbol GDQAH), currently selling for $3.60 with the Delta at 0.56.  

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