Though options trading investors might think the earnings cupboard would be bare next week, it’s actually an oasis of sorts. Around 15 S&P 500 companies are on the schedule, including some big tech names — Oracle (NASDAQ: ORCL), Adobe (NASDAQ: ADBE), and Research In Motion (NASDAQ: RIMM). We’re going to focus on the retail space, however, which bridges the entire spectrum from high end (Tiffany [NYSE: TIF]) to deep discount (Dollar General [NYSE: DG]).

Let’s take a closer look at Walgreen (NYSE: WAG), the drug and variety chain with more than 7,500 outlets nationwide. WAG reports earnings on Tuesday, March 22, before the bell, with analysts expecting 80 cents per share, an 18% increase from a year before.

The company has a spotty record of beating the estimate, having split the past eight (four beats and four misses). On the other hand, the shares have performed well after three of the past four reports, including big one-day pops of 5.5% and 11.1% after the most recent two.

More importantly, these gains were followed by additional upside. After running up more than 60% since late August, the stock is currently in the midst of a pullback along with the rest of the market. But the 40 level appears to be providing strong support. This may be partly due to heavy put open interest at the 40 strike, especially in the April series.

Walgreen (NYSE: WAG)

Sentiment toward WAG is mixed, although the put/call ratio is coming off a peak and nine of 25 analysts still rate the shares a “hold.” That means we could see some potential buying pressure should these skeptics switch to the bullish camp, especially if WAG impresses with earnings.

WAG operates in a space that continues to be popular with shoppers. Besides its large presence in the retail pharmacy sector, the company also operates in the discount space that has been so popular for the past few years. With consumers showing no inkling of abandoning their thrifty ways, WAG should continue to benefit.

Along with a solid record of recent post-earnings performance, chart support, and enough pessimism to fuel a rally, we like WAG over the next month or more. Buy the WAG April 40 Call for around two dollars.  

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