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Momentum plays take aim at Colfax

David Russell (david.russell@optionmonster.com)

Colfax fell on a downgrade today, but the bulls don't care.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 2,500 December 60 calls for $1.15 to $1.20. Volume was 13 times open interest at the strike, indicating that new money was put to work on the long side.

Long calls lock in the price where shares can be purchased in the company, which makes welding materials and handling systems for fluids and gases. Investors use the contracts to cheaply position for upside, letting them avoid missing a rally while risking much less capital than is needed to buy the stock outright. (See our Education section)

CFX is down 3.18 percent to $51.17 in late morning trading. It was downgraded to "hold" from "buy" at Deutsche Bank, which said its growth prospects don't justify such a high rating. The analyst also cited exposure to emerging markets.

Colfax entered the session up 31 percent so far this year, and now its shares are trying to hold support at their 30-day moving average. That could make some momentum players think that it's worth taking a shot on the name.

The company hasn't yet announced the date of its next earnings release, but last year's calendar suggests it will occur in late July.

Total option volume is 20 times greater than average so far today, according to the Heat Seeker. Calls outnumber puts by a bullish 62-to-1 ratio.

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