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New Short Plays

Terra Nitrogen - TNH - cls: 129.40 chg: -6.42 stop: 137.26

Company Description:
Terra Nitrogen Company, L.P. (TNCLP) is a major U.S. producer of nitrogen fertilizer products. (source: company press release or website)

Why We Like It:
We normally avoid playing high-dollar stocks on the Premier Investor newsletter but the action in TNH looks too tempting to miss. The company reported earnings this morning and they crushed the only estimate. TNH's EPS numbers were $3.59 versus a $2.60 estimate yet the stock got sold anyway. Here's out plan - sort of two trades in one. The action today was bearish and the close under short-term support at $130 is an entry point for shorts. We are suggesting shorts right here at $129.40, with a stop loss at $137.26. Our target is the $115.00 level. If you want you could target the 200-dma currently rising toward $113. TNH has consistent support at the 200-dma and we suspect that bulls will buy the dip again. We want to short it now, cover at $115.00, and then buy a dip at the 200-dma with a stop loss at $108.95, which would be under the January low. Then we ride the bounce back to $124.00-125.00. FYI: The P&F chart is very bearish with a triangle breakdown sell signal and a $112 target but the P&F chart is also showing some support near $122. Meanwhile the latest data puts short interest at 3% of the very (VERY) small float of 4.8 million share. A 3% short interest is not normally that worrisome but that is a very small float and raises the risk of a short squeeze.

Picked on February 07 at $129.40
Change since picked: + 0.00
Earnings Date 02/070/08 (confirmed)
Average Daily Volume = 455 thousand
 

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