Does BMC Software (BMC) Bounce?
by Houghton and Atkeson 09/26/08
BMC Software (BMC) is hitting a 52-week low today and is currently trading at about $29.40 per share.
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There are many momentum stock investors who will tell you buying stocks at their 52-week lows is not a good idea. Someone forgot to tell the option investors this.
This morning, BMC Software options traded six times usual volume. Most of the activity is the BMC Oct 30 Calls (BMCJF), which have traded 4,758 contracts. This represents one-third of all open interest in the calls.
Buying upside calls may make sense technically, as the $29 price point has been a point of support over the past year.
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Looking into June, the market should begin refocusing on upcoming earnings reports for evidence the economy is gaining momentum.
Watching the Treasury's Actions
In the short-term, the government's bond auction is likely to be a key driver of stocks.
Treasury Auction Boosts Market
The Treasury's auction of two-year notes brought an upside surprise which should alleviate fears of a lack of demand for U.S. paper.
Credit Markets Point to Upturn
The credit market, a reliable indicator of equity direction, suggests we will break out of the SPX's trading range to the upside.
The market seems to be saying that a 30% move up from the lows is ahead of the real economy and the market needs to allow the economy to catch up.
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