Gilead Sciences Stock Could Ride Patent Victory Higher

Late Friday, a federal judge reversed a jury order requiring Gilead Sciences, Inc. (NASDAQ:GILD) to pay Merck (MRK) $2.54 billion in a hepatitis C patent infringement case. In response, RBC hiked its GILD price target to $94 from $92, and the stock is up 0.8% to trade at $81.36.

RBC's lofty new price-target represents territory GILD stock has not seen since April 2016. Nevertheless, the equity boasts a year-to-date gain of 13.6%. Like many other stocks, GILD shares touched an annual high of $89.54 on Jan. 29, but subsequently pulled back to within one standard deviation of their 40-day moving average, a trendline the equity has traded north of since early January.

According to data from Schaeffer's Senior Quantitative Analyst Rocky White, there have been three other times in the last three years when the stock has pulled back to this trendline after spending a significant amount of time above it, resulting in an average 21-day gain of 4.53%. The stock has also been positive 67% of the time at the end of this one-month period.

Upgrades could also push the drug stock higher. Of the 22 brokerages covering GILD, nine rate it a tepid "hold." Continued technical outperformance could prompt these analysts to rethink their bearish positions.

Looking at options data, GILD's Schaeffer's put/call open interest ratio (SOIR) of 0.63 is docked below 84% of comparable readings taken in the past year. This low reading suggests that short-term speculators have rarely been more call-skewed toward the stock during the past 12 months.

Digging deeper, the March 85 call has seen the biggest rise in open interest during the last 10 days, with 16,673 contracts added. According to Trade-Alert, the majority of the action here occurred on Feb. 7, and was of the buy-to-open variety -- indicating options traders are banking on GILD stock to keep climbing over the next month.