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Bulls seek their roots with Ancestry.com

Posted
8/23/2012 1:32:00 PM
By: optionMONSTER
Referenced Stocks:ACOM

Ancestry.com has pulled back after ripping higher, and the bulls are stepping in.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 2,500 October 30 calls for $2.85 and the sale of an equal number of October 35 calls for $0.75. Volume was above open interest at both strikes, indicating a new position was initiated.

It cost $2.10 to open and will earn a profit of 138 percent if the stock closes at or above $35 on expiration. The strategy is known as a bullish call spread because it will leverage a move between two prices. (See our Education Section .)

ACOM rose 2.61 percent to $31.03 in afternoon trading and is up about 30 percent in the last three months. The provider of family-history data has been rallying amid takeover speculation, and exploded higher on July 25 after quarter results beat expectations. Management also raised full-year guidance.

It surrendered some of those gains in the last week, but quickly bounced after finding support at its 50-daymoving average. That could make some chart watchers think the uptrend remains intact.

Overall option volume is 5 times greater than average so far in the session, according to Heat Seeker. Calls outnumbered puts by a bullish 13-to-1 ratio.