Bulls target Focus Media on pullback

By David Russell,

Shutterstock photo

Focus Media has pulled back to a key support level, and the bulls are looking for the next leg higher.

optionMONSTER's Heat Seeker tracking system detected the purchase of almost 3,700 July 30 calls against open interest of 1,594 contracts. Most of the contracts priced for $0.55 late in the session as the Chinese media company rallied, with a single block accounting for the bulk of the volume.

FMCN rose 4.91 percent to $27.99 yesterday. The company has benefited from strong demand for its network of digital advertising screens and raised guidance the last two times it reported earnings, on March 8 and May 24.

FMCN The shares enjoyed a big rally in the first four months of the year, climbing from about $22 to over $37. But the bears took charge in May and June amid a broad selloff in Chinese equities.

FMCN has now returned to the same price area where it peaked in late 2010 and the location of its 200-day moving average (purple line on chart at right). That could make lead traders to believe that it's now back to support and ready to rally again.

The Heat Seeker also detected the purchase of about 1,800 July 27 calls earlier in yesterday's session, mostly for $1.10 to $1.20, though that activity was below open interest in the strike.

Overall option volume in FMCN was almost twice the average amount.

(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 Nasdaq, Inc.

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This article appears in: Investing Options
Referenced Stocks: FMCN

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