Bulls target J&J for historic breakout

By David Russell,

Shutterstock photo

A long-term investor expects Johnson & Johnson to start making new highs.

The pharmaceutical and medical-supply giant has been trapped below $70 for most of the last decade, but yesterday optionMONSTER's tracking systems detected the purchase of block of 7,400 January 2015 80 calls for $1.35. Open interest in the strike was just 5 contracts at the beginning of the day, so this is clearly fresh buying.

Long calls lock in the price investors must pay for the stock, so they can generate some nice leverage in the event of a rally. If it doesn't climb, however, these options will expire worthless. (See our Education section)

JNJ rose 0.44 percent to $68.90. It rallied sharply in June and has been consolidating in a range since then, holding support above its 2011 highs.

That could be leading some chart watchers to believe that the stock is ready to keep running for some time. The unusual thing about yesterday's option trade was their extremely long time horizon.

Overall option volume was low for the name at just 17,129 contracts, well below the 59,000 it sees in a typical session. But those 2015 calls really stood out, accounting for more than 40 percent of the total.

(A version of this post appeared on InsideOptions Pro yesterday.)

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

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing Options
Referenced Stocks: JNJ

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