More downside expected for Dynegy


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Dynegy is showing bearish signs, and traders are looking for more downside.

optionMONSTER's Depth Charge monitoring program detected the purchase of more than 1,300 December 6 puts for $1.55 and 2,000 December 5 puts, most of which priced for $0.88 to $0.90. Volume was above open interest in both strikes.

DYN slipped 1.46 percent to $4.73 yesterday, but at one point in the session it was up more than 6 percent. The electricity-generation stock has been trending lower for more than more than two years despite upside in the broader market.

It's been wrangling with a giant debt load and is tied up in a legal fight with bondholders over its attempt to restructure obligations without a Chapter 11 bankruptcy filing. It made a lower high earlier in the month when it slammed into resistance at its 200-day moving average, and seems to be tracking its 50-day moving average to the downside.

Some chart watchers may consider that evidence of a bearish trend, which would explain yesterday's activity.

Overall option volume was 41 times greater than average, with puts outnumbering calls by 17 to 1.

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: DYN

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