Rite Aid Rallying On Monster Volume: A Technical Look
Joel Elconin is the co-host of Benzinga's #PreMarket Prep, a daily trading idea radio show.
Rite Aid Corporation (NYSE: RAD) shares were trading higher by $0.40 (5 percent) at $8.28 in Wednesday's session. Over the last two days, there has large amount of call buying in the issue.
Late in the session on Tuesday, it was reported that in the March $8.00 call, 5,000 contracts traded the ask price of $0.15. Those calls are now in the money at its current price.
In Wednesday's session in the April 9 call, 81,402 contracts traded at the ask price of $0.20, while the issue was trading at $7.99. Wednesday's volume of 107,000 in the option is disproportionate to the open interest of only 11,000.
A possible explanation for the corresponding spike in the share price is that market-makers are hedging their bets by purchasing the shares in the open market to offset their negative position in the issue.
Tuesday's rally is took place on much higher than normal average volume: 31.2 million vs. its 20-day average of 16.7 million. So far in today's session, 38 million shares have changed hands with more than four hours left until the closing bell.
If the rally continues, there may be resistance at its February 11 high ($8.48). That level marked its highest price since June 2014, when it peaked at $8.62.
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