בס״ד

A 1390% Profit! & You Can’t Clean That With Soap! (CHD, CAR)

Posted on December 9, 2021

Before we get to today’s hum-doozy, we have another trade to close for a pretty penny.

It’s our CAR initiative, the details of which can be found HERE.

To sum, we’re holding a $7.50 credit on the trade and the February 18th 260 synthetic short.

And with price today at $248.15, we’ve a hunch it’s time to close.

The short CALL trades for $42.20 and the long PUT for $49.60.

Buy back the first and sell the second, and you pocket an additional $7.40 to add to your existing $7.50 – for a NET take of $14.90!

Yowza!

For those who followed this one from the beginning (it cost a buck to open), your profit is an automotive 1390%.

Drive it wherever you want.

And Now For Mashiach Ben Yosef!

We’re pursuing the filthy Midianite thieves at Church and Dwight today (NYSE:CHD), those same crooks who hail from the Soap and Cleaning Materials industry, but whose dirty methods we shortly plan to expose.

CHD’s brands include the popular Arm & Hammer line, Aim toothpaste, Oxi Clean, and something called Trojan.

Apparently for horses.

Anyway, let’s look at some fundamentals.

  • CHD carries an untidy, trailing-twelve-month Earnings multiple of 28.40x,
  • A stained Price to Book ratio of 6.49,
  • Offers a Dividend Yield of 1.01%, and – get this…
  • Saw insiders dump $106 million in stock over the last six months, of which –
  • $96 million was offloaded in just the LAST TEN DAYS!

Sweaty?

And is there a CHD product to deal with that sort of alluvium…?

Cheeky!

Now, we know that earnings came in stronger than expected back at the end of October.

And we know that a day before (on October 28th), management approved a new share-buyback plan of up to $1 billion – just before the insiders started selling!

Coincidence…?

So, it could be there’s more selling to come – along with more buybacks.

But it’s very unlikely that price will move higher from here.

Because why would those insiders have sold?

Hmm?

Have a look at the chart –

Technically, we have –

  1. RSI overbought in late November (in green) and now struggling to stay above its midway waterline.
  2. MACD rolling over at the end of the month and now descending toward its own waterline.  Taken together, these two indicators point to CHD returning to its prior substandard performance (S&P up 28% on the year, CHD up not even 10%).
  3. Price is up 17% in two months, but just six sessions ago, the trend-line that brought it to those heights cracked (in red).
  4. A double-top has now formed (in blue) that looks to be weighty (perhaps because insiders continue to sell).
  5. And a gap requires filling at the bunched moving averages at 86.

All told, it looks challenging for CHD in the near- to mid-term.

We’ve therefore crafted a trade that stands to profit handsomely from a very mild retracement.

And it looks like this –  

A Jew and His Gold recommends you consider selling the CHD January 21st 95/100 CALL spread* for a credit of $1.70 (2.65/0.95) and buying the CHD January 21st 95/90 PUT spread for $2.10 (3.00/0.90).  Total debit on the trade is $0.40.

[*Sell the 95 CALL and buy the 100 CALL.  **Buy the 95 Put and sell the 90 PUT.]

Rationale: this is a setup that will pay $5.00 for $0.40 expended ($4.60 NET).  That’s an 1150% payout (max), if it works.

Max loss is $5.40 (difference between the CALL strikes plus the initial debit).

A pullback to 90 (where price was just last week) will give us the win we’re looking for.

We’ve got 43 days to realize the win – not as long as we usually set for our trades – but the risk/reward profile was just too good to pass up.

And just a 5.2% decline will pay us in full.

K-el Shaddai, help us.  And let Mashiach ben Yosef be revealed!

Many happy returns!

Matt McAbby

 

Leave a Reply

Your email address will not be published.