Long and Short Ideas for an Ag Stock

07/17/2012 9:00 am EST

Focus: STOCKS

Greg Harmon of Dragonfly Capital outlines a variety of long and short trading ideas for an agriculture related stock.

CF Industries (CF) is in a quandary. It may be falling from a double top near 203, or it may be consolidating for a move higher after a second touch there. The Relative Strength Index (RSI) is bullish and holding at a very positive level, with a Moving Average Convergence Divergence indicator (MACD) that is at zero and debating a cross to negative. Support lower is found at 190 and 175 before 160.

The three-box reversal Point and Figure (PnF) chart carries a price objective of 260, and there is a Measured Move over 203 to 230. The bias is to the upside, but it could move either way.

chart
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Here are a few trading ideas for both bulls and bears:

Long Ideas

  • Trade Idea 1: Buy the stock on a move over 203 with a $5 trailing stop. Take off one-third at 230.
  • Trade Idea 2: Buy the August 210 Calls (these were offered at $3.70 late Friday) on a move over 203 using a price of 198 in the stock as a stop. Spread them against the August 230 Calls on a touch at 215 to take back your premium.
  • Trade Idea 3: Sell the August 165 Puts ($1.42) on the trigger over 203.
  • Trade Idea 4: Buy the August 165/210 bull Risk Reversal ($2.28) on a move over 203.

Short Ideas

  • Trade Idea 1: Sell the stock short on a move under 189 with a $3 trailing stop.
  • Trade Idea 2: Buy the August 185 Puts ($5.60) on a move under 189.
  • Trade Idea 3: Buy the August 185/165 Put Spread ($4.18) on a move under 189.
  • Trade Idea 4: Sell the July/August 190/185 Put Diagonal Spread ($3.90) on the same trigger under 189.

Greg Harmon can be found at Dragonfly Capital.

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