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Traders Calling The Bottom in DHR

Traders Calling The Bottom in DHR

Posted on 24 July, 2014 by admin

Danaher Corporation (DHR) manufactures medical products and provides services to support its customers worldwide. The company reported subpar earnings for the second quarter and cut its forward guidance causing the stock to sell off. But DHR is fighting back and some traders seem to think that it will continue its short rally with decidedly bullish trades coming across the tape today. One trader swept every exchange and laid out $2 million in premium against tiny open interest to get long DHR through December expiration.

DHR is actually a loser, down 1% YTD but recovering from a harsh selloff from its last earnings call. Technically, the chart is showing a rounding top but that too was also likely exacerbated by the 5.5% selloff earlier this month. DHR is up on the day and looking to continue, as the order flow today is extremely bullish. The chart looks to be breaking to the upside of the Ichimoku cloud. If this gains some momentum, we would be able to say that this is not a hedge against a short position but rather a speculative bet that the stock will indeed fly high with a price target around $80. Let’s look at a trade:

The Trade:

Buy the Dec 80 Calls for $1.95

Risk: $195 per 1 lot

Breakeven: $81.95

 

The Greeks:

Delta: Long

Gamma: Long

Theta: Short

Vega: Long