Looking for a Summer Rally in Popular

Includes: BPOP, NYCB
by: optionMONSTER

By David Russell

Popular (NASDAQ:BPOP) is up 34 percent in the last month, and the bulls are looking for more gains into the summer.

optionMONSTER's Heat Seeker tracking system detected the purchase of about 9,200 July 3.50 calls against open interest of 3,801 contracts. Most of the volume priced for $0.20.

BPOP Chart

BPOP are up 0.11 percent to $2.72 in midday trading. The beaten-down Puerto Rican lender has been climbing along with other regional banks as investors anticipate lower loan-loss reserves in the second half of 2010.

The company's results came in worse than expected the last time it reported earnings on Jan. 21. However, the shares have been working their way higher since bottoming at $1 in July amid earlier bullish options activity.

Today's call buyers need BPOP to rally at least 35 percent by expiration for their positions to turn a profit.

The stock has been consolidating below the $2.70-2.80 area where they peaked in October, forming an apparent bullish flag chart pattern. That may cause some traders to expect more gains in coming weeks.

Another potential catalyst could be a report that the government is seeking buyers for smaller banks in Puerto Rico. New York Community Bancorp (NYB), another regional lender, ripped higher after buying assets from regulators in December. Traders may expect a similar pattern in BPOP.

Overall options in the stock is triple the average so far today, and calls outnumber puts by more than 950 to 1.

(Chart courtesy of tradeMONSTER)