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Momentum traders target MarkWest

David Russell (david.russell@optionmonster.com)

MarkWest Energy ended last week with a pullback, and momentum players jumped in.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 5,500 January 75 calls against open interest of just 526 contracts. The first trades priced for $1.60 halfway through the afternoon, followed by more transactions for as much as $1.80. The largest block fetched $1.75.

These long calls lock in the price where shares can be purchased in the Denver-based pipeline company. Investors use them to avoid missing a rally or to leverage an otherwise modest move. For instance, a gain of less than 9 percent by expiration will more than double the value of the January 75s. (See our Education section)

MWE ended Friday's session down 1.87 percent to $70.65. The stock touched an all-time high of $73.96 earlier in the week before retreating and is now around the same level where it peaked in May and August. That could make some chart watchers think that shares are now sitting at support and ready to move higher.

The company has benefited from its exposure to the fast-growing domestic-energy industry and is up 38 percent so far this year. Activity has been very bullish across the sector of late.

Total option volume in MWE was 8 times greater than average in the session, according to the Heat Seeker. Calls outnumbered puts by a bullish 17-to-1 ratio.

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