New Plays, Thursday, 04/03/2008
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Potash Corp. - POT - close: 167.67 chg: +6.58 stop: 149.75
PotashCorp is an integrated producer of fertilizer, industrial and animal feed
products. We are the world's largest fertilizer enterprise by capacity,
producing the three primary plant nutrients: potash, nitrogen and phosphate.
(source: company press release or website)
Why We Like It:
POT is constantly on our watch list and a frequent addition to the newsletter.
The fundamentals on this company seem very bullish for the next few years and
the stock's ascent shows it. If you can catch a wave on this stock it's exciting
but the undertow can be vicious when the profit taking hits. We were stopped out
back in mid March but suggested the dip to its 100-dma was probably another
entry point for the bulls. Now the stock is breaking out from a multi-week
inside its longer-term up trend. Fueling today's move was
a better than expected earnings report from rival Monsanto (MON). Today's rally
in POT over resistance near $165 looks like a new entry point for calls.
However, readers should note that another company in this industry, Mosaic (MOS)
is due to report earnings tomorrow morning. If MOS' news is good then POT could
spike again tomorrow. We would not want to open positions if POT gaps above
$172. While we are suggesting call
positions now a dip back toward $165 would be
more attractive although we doubt we'll see it. Our first target is the
$179.50-180.00 zone. Our second target is the $188.00-190.00 zone. More
aggressive traders could aim for the $200 region. FYI: The P&F chart is bullish
with a $218 target. We want to reiterate that this stock can be exceptionally
volatile and traders should tread carefully and have a strong stomach. You might
want to play with a tighter stop near $155 or $160ish.
We are suggesting the May calls but plan to exit ahead of the late April
earnings report. When considering an option on one of our suggested trading
candidates it is up to the individual trader to decide which month and which
strike price best suits your trading style and risk.
BUY CALL MAY 160 PYP-EL open interest=1562 current ask $18.10
BUY CALL MAY 165 PYP-EM open interest= 878 current ask $15.30
BUY CALL MAY 170 PYP-EN open interest= 752 current ask $12.80
BUY CALL MAY 175 PYP-EO open interest= 491 current ask $10.50
BUY CALL MAY 180 PYP-EP open interest= 835 current ask $ 8.50
BUY CALL MAY 185 PYP-EU open interest= 280 current ask $ 6.90
Picked on April 03 at $167.67
Change since picked: + 0.00
Earnings Date 04/24/08 (unconfirmed)
Average Daily Volume = 7.7 million