Bulls look for Covidien to bounce

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Covidien has been basing out after a big drop, and now the bulls are looking for the Irish medical supplier to bounce.

COV Chart optionMONSTER's Heat Seeker tracking system detected the purchase of more than 5,000 September 37.50 calls for $0.28 to $0.50 against open interest of just 547 contracts. The call buying pushed total option volume in the name to more than 9 above average.

COV is up 1.55 percent to $37.27 in late morning trading but has lost 28 percent of its value since peaking above $52 in April. The stock has now returned to the same levels where it traded between May and July of 2009, suggesting that support is in place.

Today's call buyers are looking for a short-term pop and need COV to climb only about 2 percent by expiration next Friday for the calls to turn a profit.

The last earnings report on July 29 was mixed, with earnings ahead of forecasts but revenue light. Since then, the company completed divestitures of its specialty-chemicals business and some sleep-therapy products.

Calls account for a bullish 94 percent of the activity in the name so far today.

(Chart courtesy of tradeMONSTER)




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Options

Referenced Stocks: COV

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