Why Omega Healthcare Was The Long Trade Of The Day

Omega Healthcare Investors OHI is a compelling long trade Tuesday morning for a few reasons.

Omega has a fantastic intermediate-term technical set-up, is outperforming a lagging REITs industry, and, perhaps most importantly, flashed a heavy insider buying signal on Monday.

The summer months were not kind to REITs in general, and Omega got swept along for the ride to the downside. From late-May through August, the stock sold off from weekly highs just south of $38 all the way down to a base of $27.50 by early-September. Since then, Omega has righted the ship, establishing an uptrending pattern moving into the end of the year.

What's compelling moving forward is that REITs VNQ have been slumping in recent weeks, while Omega is headed in the opposite direction. While there has been a slight pull-back in line with the recent REITs downturn, Omega is generating some serious upward action in the short-term while the greater industry falls. It helps that Omega had a favorable Q3 earnings announcement on October 31, beating consensus expectations on major metrics.

Also providing a great reason to get long Omega is that the stock has flashed a heavy insider buying signal this week. Insider buying signals are an effective and often under-utilized trading tool. Whenever corporate insiders are buying their own stock heavily, it is usually for good reason - they think the stock is going up! So any time a great set-up is bolstered by a heavy insider buying signal, it's even more compelling. Omega has a nice technical set-up and the heavy insider buying signal is added incentive.

Omega has immediate upside to $34 based on resistance hit in July, and again in late-October. A run back to $34 is a cool 5.6 percent gain from current prices. With a stop at recent "higher-low" support ($31.25), the downside is -2.95%, making the reward to risk ratio a just under 2 : 1.

There are a lot of reasons to like Omega. Whether it's the heavy insider buying signal, the positive earnings announcement, the short-term out-performance, or even just the chart itself, Omega looks poised to make a run back to $34 in the short-term and is today's most compelling buy.

When to Consider Entering the Trade:
At the current price (~$32.20).

When to Consider Exiting the Trade:
At a close below $31.25 (Breakdown) / An intraday price of $34.00 or above (Profit-Taking)

Disclosure: At the time of publication the editor and affiliated companies own the following positions: OHI

Note: Positions may be bought or sold while this publication is in circulation without notice.

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