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Fording Cndn Coal - FDG - close: 83.90 chg: -4.45 stop: 88.75

Company Description:
Fording Canadian Coal Trust is an open-ended mutual fund trust. Through investments in metallurgical coal and industrial minerals mining and processing operations, the Trust makes quarterly cash distributions to unitholders. The Trust, through its wholly owned subsidiary, Fording Inc., holds a 60% interest in the Elk Valley Coal Partnership and is the world's largest producer of the industrial mineral wollastonite. Elk Valley Coal Partnership, comprised of Canada's senior metallurgical coal mining properties, is the world's second largest exporter of metallurgical coal, and expects to supply approximately 27 million tonnes of high-quality coal products to the international steel industry in 2005. (source: company press release)

Why We Like It:
We have had our eyes on FDG for a while now but never added it to the play list due to its pattern. The stock has been consolidating in a neutral pattern of lower highs and higher lows for several weeks. Normally we would look for the prevailing pattern (which was up) to overcome but this time FDG is breaking down. The stock broke out from its neutral wedge and declined below technical support at its 100-dma on volume more than double the average. FDG's P&F chart also shows a sell signal that currently points to a $74 target. We are suggesting bearish positions at current levels with a target in the $76-75 range. This would put FDG near its simple and exponential 200-dma's. Readers can choose to buy puts at current levels or look for a possible bounce back toward the $85-86 levels and use a failed rally there as a bearish entry point.

Suggested Options:
We are suggesting the June puts. The next available would be September strikes.

BUY PUT JUN 85.00 FDG-RQ OI= 483 current ask $5.50
BUY PUT JUN 80.00 FDG-RP OI=1293 current ask $3.20
BUY PUT JUN 75.00 FDG-RO OI= 230 current ask $1.55

Picked on May 12 at $ 83.90
Change since picked: - 0.00
Earnings Date 04/25/05 (confirmed)
Average Daily Volume = 394 thousand
 

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