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‘Cement Shoes’ Found on Rio Grande Corpse! (CX)

Posted on June 3, 2021

Today’s trade is straight pasta and tomato sauce.

Like mama used to make.

Nothing complicated or confusing about it.

Not expensive, either.

Just mix the ingredients, heat and serve.

—————————————————–

Underlying today’s trade is Mexican cement and ready-mix concrete retailer CEMEX (NYSE:CX), an outfit with 2000 outlets in roughly 600 cities in upper and lower America.

Fundamentally –

  • The company has no P/E,
  • EPS for the last five years is negative 60.50%,
  • Sales for the last five years are negative 43.20%,
  • Dividend yield is a reasonable 1.20%, and
  • Price to Book is equally so at 1.42.

In the stock’s favor is the level of insider ownership, which stands today at a wildly high 60%, and makes shorting CX somewhat of a gamble.

That said, the shares currently look poised for a pullback.  Even analysts are suggesting that next year’s earnings will contract by 2.73%.

And that cements it.

Despite infrastructure hype and a rebound in the housing market, in our estimation, CX is about to get riddled by the short-sell cartel’s AK-47s.

Have a look at the daily chart –

Technically, we have price at an all-time high after a 500% gain off the Batflu bottom, but…

  1. Yesterday say a bearish engulfing pattern (enlarged, in blue), after
  2. Several bumps off the upper edge of a ten month trend channel (in red).
  3. Moreover, RSI and MACD have been diverging negatively against price for nearly a month, a sure-enough indication that the buyers are losing momentum.
  4. First Fibonacci retracement level appears at $6.07.

And that’s our target.

Copy it down –

A Jew and His Gold recommends you consider selling the CX August 20th 8.00/9.00 CALL spread** for a credit of $0.40 (0.90/0.50) and using the funds to purchase a CX August 20th 9.00 PUT for $1.15.  Total debit on the trade is $0.75.

[**Sell the 8 CALL and buy the 9 CALL.]

Rationale: because the stock is cheap and spreads are reasonable, our downside winnings can be pocketed almost immediately.

That is, our breakeven for the trade arrives at $8.12 – just 2.8% (24 cents) below the current stock price of $8.36.

And we like that.

Maximum gain is theoretically unlimited.

Maximum loss is limited to $1.75 (difference between CALL strikes plus our initial debit).

In other words, load up, gang.

This one’s going down like Torquemada in concrete slippers.

If Hashem wills it…

Many happy returns,

Matt McAbby

 

2 responses to “‘Cement Shoes’ Found on Rio Grande Corpse! (CX)”

  1. Matt McAbby says:

    bs’d
    Hi Jim,
    Thanks for writing.
    Trade looks OK from our end.
    Sell the CALL spread for a credit (i.e., Sell the 8 CALL and buy the 9 CALL). Then use the funds to buy the 9 PUT.
    Feel free to write us at mattmcabby@ajewandhismoney.com if you have further Qs.
    All the best,
    Matt

  2. Jim Gosnell says:

    Thanks for the reply. My fault, I just misread the trade order at first. I saw my mistake after I sent the email to you guys.

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