I wrote about trading the options of VCA Antech Inc. (NASDAQ:WOOF) a little over a month ago in a post in which I said that WOOF Options are in Vogue. In that post, I explored the interesting bullish ascent of VCA Antech over the course of the last one year. I also discussed the company’s strong business fundamentals in support of a bullish momentum.
I concluded that piece, by saying “I strongly believe that the stock can breakout about $55 after the release of its first quarter (Q1 2015) earnings in April. I recommend buying the WOOF Jun 2015 55.000 call (WOOF150619C00055000) at an asking price of $2.54″.
If you didn’t read that piece, it might interest you to know that VCA Antech with its market capitalization of $4.49B is a national animal healthcare company operating in the United States and Canada. The Company operates in two segments: animal hospital and laboratory. The Company provides veterinary services and diagnostic testing to support veterinary care and it sells diagnostic imaging equipment and other medical technology products and related services to the veterinary market.
Why Are We Looking at WOOF Options Today
I checked out that WOOF June 2015 55 call option that I recommended and the contract now has an asking price of $2.06 to mark an 18% discount from its asking price of $2.54 on my recommendation. Hence, it would appear that the stock is behaving contrary to expectations. However, I have noticed a new pattern in VCA Antech’s stock chart and this pattern provides an interesting insight that might want you to hang on a little longer with the bullish thesis on the company.
The chart above shows how the shares of VCA Antech have traded within the last one year. The stock starts with a bullish ascent (blue arrow) that saw it rising from a 52-Week low of $29.36 to a 52-Week high of $55.00. The stock has entered a channel in the last three months and the channel has a $52 key support level and a $55 key resistant level.
Shares of VCA Antech will eventually breakout above the $55 resistance level or breakdown below the $52 support level. Hence, we can technically take long positions by selling covered calls on a pullback to $52 or buying call options on a breakout above $55. Going short on the stock will have us planning for a breakdown below $52.
The Bullish Catalyst
A key factor that gives VCA Antech a better shot at recording a breakout above $55 than a breakdown below $52 is the volume of evidently good news that surrounds the company. To start with, VCA Antech has a Zacks Number 2 “Buy” Rank and it has a “B” grade and “C” Grade for momentum and value respectively. Hence, institutional analysts with access to the most comprehensive data are optimistic about the prospects of the stock.
Secondly, VCA Antech is set to release its first quarter results (Q1 2015) on April 29 and all indications suggest that the company will report another quarter of outperformance. It might interest you to know that VCA Antech has provided positive price and EPS surprises in 9 out of the last 10 quarters.
How to Trade WOOF
I am still pitching my tent with the bulls on VCA Antech and I am maintaining the bullish position on the WOOF Jun 2015 55.000 call (WOOF150619C00055000), but you might want to manage risks with a stop/limit loss order at $1.95.
— Daily Option Alerts