Options on Corning (GLW) have witnessed a noticeable uptick in activity during the past two trading sessions. On Friday, call volume spiked on speculation the company might be the subject of a private equity deal. The call activity continued on Monday after Lehman analysts had favorable things to say about the company. Meanwhile, the chart pattern has seen some improvement lately and this stock might be an interesting play on a possible seasonally strong period for the LCD glass market in the second half of the year.

Headquartered in Corning, New York, Corning Inc. is a technology company that operates four key business segments: 1) Telecommunications, 2) Environmental technologies, 3) Life sciences and 4) Display technologies, which includes liquid crystal display [LCD] for flat panel technology. The company generated more than $5 billion in revenues from its products and services last year. It is a large cap stock with a market value of nearly $35 billion. Shares trade on the New York Stock Exchange [NYSE] under the ticker symbol GLW.

Last Friday, call options on Corning traded briskly amid talk of a private equity deal. The rumor was reported on Briefing.com and was somewhat vague. The stock didn't seem to react, since it finished the day up just 3 cents to $21.77. Nevertheless, the chatter seems to explain a surge in activity involving April and May call options. At the end of the day, more than 54,000 calls traded on the day, compared to average daily volume of 26,591 for GLW puts and calls.

The call volume continues early this week. More than 65,000 contracts crossed the tape during the first two hours of trading. The action might be in response to positive broker comments Monday morning. According to Lehman Brothers analysts, GLW is a name to own heading into a seasonally strong second half of the year. The firm believes that Corning's new pricing strategy is holding up well and believes that earnings for the March quarter will come in at the high end of consensus estimates.  Shares rose 71 cents to $22.49 following the comments Monday morning.

The gains on Monday lifted GLW towards its best levels of the year. The stock is up more than 20% since late February. In addition, as we can see from Figure 1 (Monday's move not shown), the recent rally in the share price is part of a trend that has lasted for more than four years. In the big picture, this stock seems caught up in a longer-term bullish trend.

Figure 1: GLW Weekly Chart
(Click here for larger view.)

Looking forward, the next test will be whether the stock can hold on to its recent gains and make a run to new highs for 2007. The stock hit its best levels of the year in early February at $22.80 a share. A move above that price level might bring last October's high of roughly $25.00 into play. However, a move beyond that level might require an additional catalyst, like more private equity chatter or a very strong earnings report when the company next releases results in late April.


Frederic Ruffy
Senior Writer & Index Strategist
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