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More downside expected for Dynegy

Posted
9/28/2011 3:47:00 AM
By: optionMONSTER
Referenced Stocks:DYN

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.