Shares of the clinical laboratory company, Laboratory Corporation of America (LH), are up 15.61% year to date. On July 18, LabCorp reported Q2 EPS of $1.84 vs the $1.77 estimate and revenue of $1.52B vs the $1.50B estimate. The revenue increase of 3.3% year over year was largely due to test volume sales. On top of the strong quarter they raised FY14 EPS guidance to $6.50-$6.75 from $6.40-$6.70 and revenue guidance to $5.92B. The consensus Wall Street estimate is $6.68 in EPS and revenue of $5.91B. On July 21st, Maxim maintained their buy rating, but raised their price target to $130 from $120 following their meeting with management and a tour of the largest lab located in New Jersey.

Unusual Options Activity

On June 3, roughly 9,000 Nov $110 calls were purchased for $2.40-$3.00 each. Of the 13,054 total call open interest, the Nov $110 calls represent 62% of that. The breakeven of the big buyer is 6.69% above the current share price ($112.70).

Bullish Price Action On The Daily And Weekly Charts

The chart below shows the stock is trading in a well-defined uptrending channel. On the weekly chart, shares of LabCorp are poised to retest the $108 resistance level from November. A confirmation breakout on a weekly close would setup for a move up to $115-$120 later this year. Using a stop loss just under the June lows on a stock position makes the reward/risk ratio better than 2.5:1.

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LabCorp (LH) Options Trade Idea

Buy the (LH) Nov $110 call for $3.00 or better
Stop loss- None
First upside target- $6.00
Second upside target- $9.00

Disclosure: I’m long the Nov $110 calls for $2.95 each.

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