Lexmark bulls looking for breakout

optionMONSTER

Lexmark International is churning near long-term highs, and traders are looking for a breakout.

optionMONSTER's Heat Seeker monitoring program detected the purchase of more than 2,600 January 50 calls, most of which priced for $2.55. Volume was more than quadruple previous open interest at the strike, which indicates new money was put to work on the long side.

Calls lock in the price where investors can buy shares in the imaging company, letting them cheaply profit from a rally. They can also generate significant leverage if the stock moves in the right direction. (See our Education section.)

LXK rose 0.14 percent to $48.38 yesterday, and is up 36 percent so far this year. It's been climbing on mostly strong earnings reports and is now pushing against the same price range where it peaked in 2010.

The stock has managed to stay above its rising 50-day moving average at the same time. Chart watchers could interpret that as a bullish triangle that will be followed by a breakout to new highs.

Overall option volume was triple the daily average, with calls accounting for more than 70 percent of the total.



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