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How bull is playing for Express rally

By: optionMONSTER
Posted: 11/30/2010 7:02:00 AM
Referenced Stocks: EXPR

Express is starting to show bullish signs, and one investor is positioning for a rally.

optionMONSTER's Heat Seeker tracking system detected the purchase of about 1,600 December 15 calls for $0.85 to $0.91. A similar number of December 12.50 calls was sold at the same time for $2.68 against existing open interest, which indicates that a long position was rolled to the higher strike.

EXPR The trade let the investor recover about $1.75 of premium while providing an opportunity to make money if the women's clothing chain continues to rally.

EXPR rose 2.48 percent to $15.26 yesterday. The company is scheduled to issue results after the bell Wednesday, marking only its second earnings release as a public company. Its last report on Sept. 1 was better than expected, fueled by a 6 percent gain in same-store sales.

The stock has been showing potentially bullish technical patterns, making successively higher lows since September and consolidating above its 50-day moving average (black line on chart). It has also lagged amid strength in the broader retail sector.

Given that the last earnings report was positive, the investor who rolled the calls probably expects more good news this week. The activity pushed total option volume in EXPR to 38 times greater than average, with calls accounting for a bullish 98 percent of the activity.

(Chart courtesy of tradeMONSTER)