NEW BEARISH Plays
CVR Energy, Inc. - CVI - close: 41.09 change: -1.57
Stop Loss: 42.25
Current Gain/Loss: unopened
Entry on August -- at $--.--
Listed on August 19, 2013
Time Frame: 4 to 6 weeks
Average Daily Volume = 579 thousand
New Positions: Yes, see below
Why We Like It:
CVI is a diversified holding company with two main operations: a petroleum refining business and a nitrogen fertilizer business.
The stock seems to get no respect. CVI has a habit of beating Wall Street's earnings estimates and just did it again when they reported on August 1st. CVI beat by a wide margin and beat the revenue estimate but investors sold the news. As a matter of fact there seems to be a pretty large bearish crowd on CVI. The most recent data listed short interest at 17% of the very small 15.5 million share float. It is surprising that more dividend investors are not buying CVI with shares currently offering a 7% yield. Yet dividend stocks have been getting crushed recently as the yield on the 10-year bond continues to rise.
CVI just broke down below short-term support near $42.00. The next level of support is $40.00. If the $40.00 level breaks then we could see CVI fall toward the $35.00 area. I do consider this an aggressive, higher-risk trade given the high amount of short interest. Therefore we're suggesting small positions or you may want to limit your trade to put options so your risk is only the price of the option.
We are suggesting a trigger to open bearish positions at $39.75. If triggered our target is $35.25.
Trigger @ 39.75 *small positions*
Suggested Position: short CVI stock @ (trigger)
- (or for more adventurous traders, try this option) -
buy the Sep $40.50 PUT (CVI1321u40.5) current ask $1.80
Note: the option has an odd strike price, mostly likely due to CVI's special dividend earlier this year.