NEW BEARISH Plays

The Dow Chemical Co. - DOW - close: 47.68 change: +0.07

Stop Loss: 50.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on October -- at $---.--
Listed on October 22, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 8.4 million
New Positions: Yes, see below

Company Description

Why We Like It:
DOW is the largest chemical company in the U.S. by sales. They make a huge variety of products from industrial chemicals, plastics, and agricultural chemicals. A main component for a lot of these is oil. The recent plunge in crude oil should be bullish for DOW and help boost margins.

The company recently reported earnings on October 22nd and they did see some margin improvement. DOW delivered a profit of 72 cents a share on revenues of $14.4 billion compared to analysts' estimates of 67 cents on revenues of $14.3 billion. Yet this better than expected quarterly report did not do much for the stock price. Shares spiked toward resistance near $50.00 and its 200-dma and then collapsed. Today was not much better. DOW hinted that they plan to cut expenses by $1 billion over the next three years and shares barely budged. The market soared with widespread gains and DOW eked out a seven-cent gain.

Technically DOW is broken. The big sell-off from its September highs sliced through all of its support levels. Now the oversold bounce appears to be failing.

I would consider this more of a technical trade. The current failed rally looks like a potential entry point for bearish trades. We'd like to see a little follow through lower. Tonight we are listing a trigger at $47.25. More conservative traders may want to see a drop under $47.00 instead.

Trigger @ 47.25

- Suggested Positions -

Short DOW stock @ (trigger)

- (or for more adventurous traders, try this option) -

Buy the Dec $45 put (DOW141220P45) current ask $1.14

Option Format: symbol-year-month-day-call-strike

Annotated Chart:

Weekly Chart: