Add POT Calls

Playing Reduced Earnings

By Bryan Bottarelli
Wednesday, April 08, 2009 10:22 AM EDT
Wed, 8 Apr 2009 14:22:00 GMT

PLAY: Buy the POT April 80 Calls (PVZ DP) at or under $3.60, good for the day. Place a protective stop limit at $1.90 and a pre-determined sniper sell at $6.00.

Dear Bottarelli Research Member,

Good morning. Fertilizer giant Mosaic (MOS – NYSE) just reported that their Q3 profits fell 89% and their sales fell 36%, both of which were below Wall Street’s expectations. As of February 28th, MOS earned $58.8 million ($0.13 per share) versus $520.8 million ($1.17 per share) for the same period one year ago. But strangely enough, these results are not taking a significant bite out of MOS’s share price. As you can see from the MOS chart below, it appears like most of these results have already been priced into the stock, which is why it’s clinging onto the strong support level at the 50-day moving average.

MOS

The fact that MOS is not moving lower indicates to me that shares might be ready for an upside push. After all, according to Mosaic’s President and Chief Executive Officer Jim Prokopanko, "Large crops are still required to secure the world’s food supply, and crop nutrients will play an essential role in achieving that objective.” In other words, despite the turmoil in the global markets, fertilizer companies remain well positioned both financially and strategically. As a result, I’d like to carefully make an April call play on one of Mosaic’s top competitors, Potash Corp. of Saskatchewan (POT – NYSE).

POT

Similar to the MOS chart, POT is also hanging close to the support point at the 50-day moving average. As a quick momentum play, I’d like to get positioned to ride an upside push. Now remember, April is a short expiration month. Expiration is Thursday April 15th, which is a week from tomorrow. Therefore, I expect this to be a quick play. On that note, here’s the trade…

PLAY: Buy the POT April 80 Calls (PVZ DP) at or under $3.60, good for the day. Place a protective stop limit at $1.90 and a pre-determined sniper sell at $6.00.

I’ll follow up later in the session with more updates. But until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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