Now May Be Time to Place Bullish Bets on This Blue Chip

Declining short interest and heavy put open interest could create tailwinds for the stock

Blue-chip pharmacy name Walgreens Boots Alliance Inc. (NASDAQ:WBA) has surged 29% off its late-June lows, and recently topped out north of $78 -- marking its highest point since January.A pullback from this area last week was cushioned by the shares' 20-day moving average, as well as their year-to-date breakeven level. With this dual layer of support in place, it's time to bet on WBA's next leg higher.

Shorts have been heading for the exits, too. Since peaking in early August, short interest is down 26%, yet the 24.15 million shares sold short still represents four days' worth of pent-up buying power, at the average trading volume. Tailwinds could also come from a shift in analyst sentiment, considering 13 of 17 brokerages rate WBA a "hold" or "sell."

In the options pits, WBA sports a Schaeffer's put/call open interest ratio (SOIR) of 1.06 that ranks 2 percentage points from an annual high. Digging deeper, there is a heavy amount of put open interest sitting at the 75 strike in both the November and December series. In short, WBA could find some help on the charts, as the hedges related to these bets unwind.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this WBA commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.