Dow Chemical pullback draws the bulls

By
A A A

Dow Chemical has had a nice pullback, and now the bulls are coming back.

optionMONSTER's Heat Seeker tracking system detected the purchase of more than 14,000 September 36 calls for about $1.83. A matching number of September 38 calls was sold for about $0.99, resulting in an overall cost of $0.84.

This bullish call spread will earn a maximum profit of 138 percent if the chemical stock closes at or above $38 on expiration.

DOW had rallied more than 70 percent between late last summer and early May amid a surge of profitability in the industry but then declined to its 200-day moving average. The stock spent four days building support at that level, then rallied 3.20 percent to $36.08 yesterday.

The company's last earnings report on April 28 crushed expectations on the top and bottom lines, fueled by demand for plastics, agricultural products, and strength in Latin America.

Based on the positive momentum in the industry, where virtually every company has handily beat estimates, as well as bullish technical indications, yesterday's spread looked like a classic "buying the dip" trade.

Overall option volume was 6 times greater than average in the session, with calls outnumbering puts by about 4 to 1.




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.

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


This article appears in: Investing , Options

Referenced Stocks: DOW

optionMONSTER

optionMONSTER

More from optionMONSTER:

Related Videos

Stocks

Referenced

83%

Most Active by Volume

100,376,898
  • $17.62 ▲ 0.51%
83,231,837
  • $25.62 ▲ 1.91%
75,739,329
  • $111.78 ▼ 0.77%
65,297,937
  • $36.37 ▼ 1.76%
59,053,093
  • $47.66 ▲ 0.29%
53,482,350
  • $2.59 ▼ 0.38%
51,504,284
  • $7.34 ▲ 2.37%
51,434,656
  • $8.14 ▲ 6.96%
As of 12/19/2014, 04:15 PM


Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com