Momentum Bulls Target Devon

David Russell of OptionMonster


NEW YORK -- Devon Energy (DVN) has been trending steadily higher, and the bulls are piling in ahead of quarterly results in two weeks.

OptionMonster's tracking programs detected the purchase of more than 9,000 September 80 calls Tuesday, most of which priced for $1.57. Volume was more than 400 times the previous open interest in the strike, which indicates new money was put to work on the long side.

These long calls lock in the price where investors can buy stock in the oil and gas company, letting them cheaply position for a rally. The low cost limits their risk, but the contracts can quickly lose value if shares drop.

Devon rose 1.34% to $78.15 on Tuesday and is up 27% this year. The stock has pulled back more recently but is now trying to bounce at its 50-day moving average, which could make some chart watchers think that its bullish uptrend remains intact.

The company is scheduled to report earnings before the opening bell on Aug. 6.

Tuesday's total option volume in the name was more than triple its daily average for the last month. Overall calls outnumbered puts by a bullish 10-to-1 ratio.

Russell has no positions in DVN.

 

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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