The Dow Jones transportation average is down more than 9 percent in 2015, widely underperforming the broader market. But according to options trader Andrew Keene, one of the index's worst performers could be on the fast track to rally after reporting earnings later this week.
But as he sees it, a combination of recent chart consolidation, bullish activity in the options market and positive earnings out of rival CSX could translate to big gains for the stock in the near future.
"Union Pacific has been consolidating in the $96 to $97 range," said Keene, founder of Keene on the Market. "I see it rallying back up to its moving average." He pointed to the 50-day and 20-day moving averages, which come in at a respective $100 and $97, for an idea of where the stock could settle in the next few days.
Shares of the beaten railroad company gained some steam Monday, closing up nearly 1 percent, but are still down more than 17 percent since the start of 2015.
It's the recent bout of unusual options activity that's really grabbing Keene's attention. "We saw a large institutional buyer of about 3,000 of the July 24 weekly 98-strike calls for $1.55," he added. Since each call option accounts for 100 shares of stock, this buyer is willing to pay $465,000 to bet the stock will rally above $99.55 by Friday.