By Giorgio Ferrero
Apple's (AAPL) sell off, yesterday, is important news because the stock comprises 15% weight of the Powershares QQQ (QQQ). The SPDR S&P500 (SPY) sold off accordingly due to Apple, which took a lot of pressure off our Feb'17 136/137, 137/138 bear call spreads. I think 1350 -1360 has proved to be significant resistance for the market, but I'm not expecting a large sell-off. Instead, I see a lot of initial support on SPY at $130 and most dips will be bought. That said, on the long side I continue to favor bull put spreads in Occidental Petroleum (OXY), Big Lots (BIG), and bear call spreads on UltraShort Gold (GLL).
Today, we take a look at Mosaic (MOS) to see how this stock performs historically.
Daily Data: Mosaic
The last time I wrote about Mosaic was on January 8, in "5 Stocks for Next Week." On January 4, the company beat EPS estimates by 7.69% while missing on revenue by 5.93%. Around that time, Citigroup downgraded the stock to neutral from buy. The technical data I was posting was for the Nov-Jan option expiration time frame.
The technicals were bullish and the result was that the stock closed at $54.96 on Jan'20, which means it booked a 3.97% gain during the specified time period. Mosaic closed within my estimated max high/low range and both of my suggested trades (Jan'20 50/47.50 bull put spread & Jan'20 47.50/45 bull put spread) expired worthless for decent 16.27% and 20.77% gains.
Fast forward to today, Mosaic has really stagnated since Jan'20 despite the extended rally that we've seen in the S&P. The shares are roughly where they closed at on Jan'20. News has certainly not been bullish recently; Agrium (AGU), a competitor of Mosaic, mentioned that its price decline was caused by weak demand for nitrogen in late FY 2011. Just yesterday morning (Jan'15th), Dahlman Rose said that potash inventories were up a massive amount, which would put pressure on Mosaic shares. My opinion is different; Mosaic is a company that is forecasted to show +18% YoY EPS growth, while it currently trades at a 10.47 P/E. Technically, the story remains bullish for this fertilizer stock. Look below to see the Jan-Mar option expiration date returns since inception.
As shown Mosaic has a very bullish historic bias during this time frame. The average YoY return is 9% during this period with a worst return of -5%. Based on where MOS close at during January option expiration it does not have much room to decline further before history may scribble down a new worst return…but I'm confident a bull scenario may still play out. On cautious note however, the market may take a small dip while Mosaic shares remain in a long-term weekly downtrend, thus I suggest the following trade.
Suggested Trade: MOS - Sell Mar'17 47.50/45 put spread (Bull Put Spread)
(Sell 47.50 Put/Buy 45 Put)
Size - 7.5% of Giorgio's Corner Portfolio Size = (3 spreads)
Entry: Sell Limit: 0.25
Stop Loss: 1.00
Exit Price: 0.00
Max Return: 11.11%
(Note: Return calculation does not include commission; Max Return is calculated as Return at Risk not Return on Margin)
I will soon be releasing the option expiration date returns and technical analytics of many Ag stocks (as I did with QQQ stock last week).
Charts are from Finviz.com
Earnings Data is from e*Trade.com
Disclosure: I do not own any investments in MOS. I do own Feb'17 bear call spreads on QQQ, I own Mar'16 AAPL bear call spreads. I'm short shares of VXX, TVIX, GLL, and ZSL. I own bear call spreads on SPY, VXX, GLL, and ZSL.
Disclosure: I am long AAPL.