CF Industries (CF) has been tailing off since touching near 228 in September. The Relative Strength Index (RSI) has turned bearish on the daily chart with the Moving Average Convergence Divergence indicator (MACD) negative and turning back lower. Both support more downside. It is now moving through the 38.2% retracement of the move higher from May with the 50% at 190 and the 61.8% at 182.26.
Support lower comes at 190 and 177 followed by a gap between 172.46 and 171.33 before a full retracement to 153.88. Resistance higher is found at 210 and 217 followed by 228. Short interest is still very low, under 5%. This stock reports after the close Monday.
Trade Idea 1: Sell the stock short as long as it is under 202.75 with a stop at 203.50. Convert it to a $4 trailing stop on a touch at 197 and take off 1/3 at 190 and another 1/3 at 182.26 leaving the rest to trail against the stop.
Trade Idea 2: Buy the November monthly 200 Puts (offered at $6.50 late Friday) and trade them like the stock trade above using the same trigger, stop and targets.
Trade Idea 3: Buy the November 200/180 Put Spread ($5.50) and follow trade 2.
Gives a 3.6:1 reward to risk ratio.
Trade Idea 4: Buy the November 200/180 1×2 Put Spread ($4.50).
Increases the reward to risk ratio to 4.4:1. Profitable from 195.5 to 164.5 at Expiry with maximum payout at 180.
Trade Idea 5: Buy the December 200/180 1×2 Put Spread ($3.80).
Increases reward to risk ratio again to 5.3:1. Profitable from 196.20 to 163.80 at Expiry with maximum payout at 180.
After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Saturday which, sees continued weakness heading into next week. Gold and Crude Oil look better to the downside while the US Dollar Index seems to be turning up and US Treasurys are biased lower within the Uptrend.
The Shanghai Composite and Emerging Markets are poised to continue consolidation, Chinese markets within the downtrend. Volatility looks to remain subdued keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ, despite the Dollar Index and Treasurys undercutting it. The Indexes themselves all look biased to the downside with a chance of consolidation within the longer term uptrends. Use this information as you prepare for the coming week and trade’m well.
Disclaimer: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
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