Investing Wisely in… Pre-Cancer Foods for Fat People! (CAG)

What greater joy!

Eat tasty, affordable and chemically-laden victuals, and spend decades without symptoms!

And then – boing! – suffer a horrific finale!

It’s your choice, friends.

Join us today, as we set the table for Conagra Foods (NYSE:CAG), makers of 101 brands of suppertime joy, each of which destroys a separate bodily organ in singularly pernicious fashion!

You don’t say…

That’s right.

But we’re not here to discuss health, friends.

As you know, here it’s all about money.

And Conagra offers a unique, round-trip opportunity to cash in between now and the beginning of summer.

But before we get to the trade, consider the fundamental picture – worth a hefty cheer from every wholesome lover of America.

• P/E is 14.95,
• Price to Book – 1.44,
• Annual Yield’s a very juicy 3.24%, and
• Annual EPS growth for the last five years is 10.80%.
• Nothing at all wrong with those numbers, eh, Cap?

Nope.

In this market, it’s almost unheard of to find a stock with similar metrics.

Have a look now at the daily chart –  

Technically, what’s most striking is the anti Batflu-hype nature of the stock.

1. While all else in the food field were losing their heads and screeching inexplicably skyward, this little birdie just meandered sideways to lower.
2. MACD and RSI (in green) have been hugging the underside of their respective midway waterlines – indicating patient anticipation of a breakout, while
3. Volume has built (in black), potentially denoting accumulation, and
4. A descending wedge has painstakingly begun to take shape (in red).  The formation is considered bullish if/when a break above the upper band ensues.
5. The lower band and long term moving average form strong support at 32 (in blue).

And it’s for all the foregoing that we’ve decided to go two ways on CAG with a calendar operation that looks as follows –

A Jew and His Gold recommends you consider setting the CAG April 1^st 33.50 synthetic PUT for a $0.30 credit (sell the 33.50 CALL for $1.65 and buy the 33.50 PUT for $1.35).  Then purchase the CAG June 18^th 31 CALL for $4.10.  Total debit on the trade is $3.80.

Rationale: We’re betting on a round trip move for CAG over the next four months – the first move lower (below $33.50), and then a climb, after April expiry (above $31.00).

Maximum loss on the trade is $3.80 – if price climbs straight higher through June expiration.

Maximum gain is unlimited.

First position should be closed no later than the April expiry.

Stay with us for up-to-the-minute trade instructions.

Many happy returns,

Matt McAbby

Follow @HughLOHaynew