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Bulls Look For E-House China to Rally

Friday, 28 May 2010 | 8:05 AM ET

E-House China has been trading near 52-week lows despite strong earnings, and now the bulls are looking for a bounce.

The company is in one of the riskier sectors of the Chinese economy: residential real estate. Much attention has focused on China is trying to cool down the ongoing housing bubble, but that didn't keep E-House from absolutely crushing estimates on May 13.

Yesterday the buyers came after the July 17.50 calls, with with a large block pricing for $0.45 and other institutional paper at the same price or $0.50. Volume climbed to 4,876, pretty impressive for a company that typically trades only 621 contracts per session.

EJ rose 3.93 percent to $14.54 yesterday and is down 11 percent in the last month. Plenty of risks remain in the company, though it seems that at least some investors think it's time to go bottom-fishing.

It could make sense when you consider how cheap the valuations are: EJ has a forward price/earnings ratio of just 11—pretty inexpensive given that profit increased by 77 percent in the last quarter. Maybe large traders have nothing better to chase, or maybe they see something promising in this stock.

The August 17.50 calls were also active for $0.70 to $0.80. All the activity pushed total options volume in the name to 11 times greater than average. Calls outnumbered puts by more than 30 to 1, so the overall sentiment was definitely bullish.

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E-House China Competes With:

Jones Lang Lasalle

Grubb & Ellis

CB Richard Ellis

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Options Trading School:

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Disclosure:

Najarian owns shares of EJ.

Pete Najarian is a professional investor, CNBC contributor, regular co-host of CNBC's "Fast Money" and co-founder of OptionMonster.com.

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Disclaimer

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