Intuitive Surgical is in ICU

A little background on $ISRG for those that are not familiar:

ISRG

ISRG_products

Now on to some charts — the evidence of what the market currently thinks about the stock. I will start off with a PnF chart first:

ISRG_PnFThe above chart shows a clear Bearishness in the stock and is driven mostly from some recent negative press about deaths involving robotic surgery technology. There is also some negative research from Citron here. The market is clearly nervous.

Now on to a regular Daily candlestick chart:

ISRG_DPrice took a nosedive on Friday through the Horizontal Support line from the December 2012 lows. A mild bounce occurred to close near the $460 level. The RSI is now in the O/S (oversold) area under 30.

So let’s move out to the Weekly time-frame to see where the next levels of Support may exist:

ISRG_weeklyAs you can see above, price is nearing a prior B/O (breakout) area near $425. The next Support area is around $400. One thing to note here that this recent price decline is on increasing volume.

One more perspective: a Weekly chart with Volume at Price turned on:

ISRG_VaPThe #1 Volume at Price bar is at the $350 level (which is under the 200 SMA). Yikes.

If you are long, and you just want to stay long that is fine. Let me suggest that you consider owning a Collar as protection for any further downside. Here is a look at the April Option chain for $ISRG as of the close Friday:

ISRG_Apr_OptionsTo pay for the cost of owning the 450 Put, sell the April 500 Call. The net cost would be $11.40 based on the closing prices. This gives you uncapped downside protection to April expiration but will cap any upside bounce to $488.60 if price moves back up ($500 strike minus cost of this Collar).

If you believe that the $400 level holds through April then you could consider selling the April 400 Put to create a 450/400 Put Spread. This would lessen the cost of the Collar to $5.20 (but caps downside protection at 405.20).