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CVX Delivers 3040% in 48 Hours! …While CF Fertilizes Our Next Profit Harvest! (CF, CVX)

Posted on March 16, 2022

Purim Sameach to ALL!

We’re coming at you early today in light of the great revolution that’s expected tomorrow.

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On Monday, we recommended a CVX bet that’s produced a windfall in just days.

The letter was called Watch Now as We Line Up Chevron…, and it urged you to sell the CVX April 14th 170/175 CALL spread for $1.95 and buy the CVX April 14th 165/160 PUT spread for $2.00.  Total debit on the affair was a nickel.

And just 48 hours later –

The CALL spread can be repurchased for $1.18 (2.84/1.66) and the PUT spread offloaded for $2.75 (10.75/8.00).

Execute, and you bank $1.52 NET on just a nickel spent.

That amounts to 3040%.

Wicked’s Right, O Silent One!

And now we move to today’s offering.

We’re playing CF Industries (NYSE:CF) this morning, because the makers of granular urea, diesel exhaust fluid and urea liquor are now ripe for the harvest.

By the way…

Granular urea?  Sounds painful.

Diesel exhaust fluid?  For WHAT?

Urea liquor?  How desperate do you have to be…?

Heaven help us…

Good Jews and Noahides, the company’s shares are about tumble, and we’ve devised a masterful trade that costs absolutely nothing to initiate and stands to deliver $5.10.

Sounds great.

Now consider the fundamentals –

  • P/E is 22.35 (double its historical average),
  • Annual Yield is 1.27%,
  • P/B is an overripe 6.34,
  • EPS are expected to FALL by 48.92% over the next year, and
  • Insiders have dumped 72.89% (!) of their shares over the last six months.  Sum total of the selloff amounts to $173 million!  And of that total, a full $150 million was cashed in over the last 30 days!

Oh, yeah… and JP Morgan downgraded the stock to ‘Neutral’ right before the latest ka-ching started to ring-a-ling.

Now look at the chart –

Technicals are wholly negative –

  1. We have an overbought RSI read and MACD rolling over (in green).  This is a clear sign of a top.
  2. In addition, WEEKLY RSI is toying with overbought while the MONTHLY RSI is also overbought (not seen here).  Not at all good.
  3. Currently, we’re witnessing the stock’s highest EVER daily, weekly and monthly MACD indications.  This means we’re witnessing a sudden bullishness that’s without precedent.  And in our opinion, unwarranted.  In fact, there’s little that might legitimize a 50% rise in 30 days on no news.
  4. The huge turnover in shares in the last month (in black) bespeaks topping action, and aligns with the incredible selling action on the part of insiders.  Classic distribution, in our view.
  5. And finally, price action is showing clear signs of a top.  The trend channel (in red) that held during the latest parabolic rise is now cracking (in blue).
  6. We’ll likely decline toward the longer term moving averages as the condition corrects (in purple).

But we needn’t get there to profit in full from today’s trade.

Have a look –

A Jew and His Gold recommends you consider selling the CF April 14th 90/95 CALL spread* for a credit of $2.40 (9.00/6.60) and buying the CF April 14th 92.50/87.50 PUT spread** for $2.30 (3.20/5.50).  Total credit on the trade is $0.10.

[*Sell the 90 CALL and buy the 95 CALL.  **Buy the 92.50 PUT and sell the 87.50 PUT.]

Rationale: we have a chance to pocket $5.10 on nothing spent if we’re right.  And that’s fantabulous.

Max loss is $4.90 (difference between the CALL strikes less the initial credit).

The trade is plagued by a single issue, and that’s the time frame.  We’ve given ourselves 30 days to close, and that places this one in the SPECULATIVE realm.

But if Mordecai and Esther could face down the accursed Haman and evil Ahasuerus… then what’s 30 days for simple yidden like us?

Many happy returns!

Matt McAbby

 

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