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How Sears trade is looking for bounce

David Russell (david.russell@optionmonster.com)

Sears Holding is near a long-term support level, and one investor is looking for a bounce.

optionMONSTER's Heat Seeker tracking system detected the purchase of 1,500 February 32.50 calls for $1.44 and the sale of 3,000 February 17.50 puts for $0.58. Volume was more than twice open interest in both strikes.

The trade cost about $32,000 and is similar to buying shares in the beaten-down retailer. It will profit from a quick rebound but lose money if SHLD drops significantly in the near term. Unlike owning the equity, the position will track movements in the stock less closely as time passes and expire worthless if it remains between $17.50 and $32.50 on Feb. 17. (See our Education section)

SHLD is down 1.83 percent to $29.57 today and has lost more than half its value in the last month. Much of that drop occurred on Dec. 27 after the company said it would close more than 100 stores and predicted a sharp EBITDA decline.

The stock is back near the same level where it bottomed during the mortgage crisis in late 2008, which could be leading some chart watchers to believe that it could rebound.

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