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Unlike Recent Trend, Monsanto Likely To Remain Range-bound After Earnings

|Includes:Monsanto Company (MON)

Tim Biggam, TradingBlock (April 3, 2012, 3:20 pm CDT)

Symbol Analyst Target Price Target Date
MON 80.00 May 18, 2012

Monsanto Company (ticker: MON), together with its subsidiaries, provides agricultural products for farmers in the United States and internationally. It operates in two segments, Seeds and Genomics, and Agricultural Productivity.

MON has rallied sharply over the past several days, moving up from the lower end of the recent trading range at 77 to the upper end at 82. Earnings are tomorrow with the expectation of 2.11 per share. MON has rallied sharply after the last three earnings reports. Coming from a contrarian perspective, I look for MON to likely trend slightly lower, especially given the recent strength in the shares. That would also bring it back towards the 20-day moving average at 79.30.

While MON shares are not expensive from a valuation standpoint, they are also no longer cheap. Implied volatilities are not at the lowest readings, but still significantly off their highs. Sentiment is somewhat overly bullish, but not decisively so.

Given all these metrics, I look for MON to remain range-bound and drift back to the middle of the range of 80 by May expiration.

Play of the Day

Based on Monsanto's (ticker: MON) current market price of $81.80 and using a target price of $80.00, a target date of May 18, 2012 and $1,000 of investment capital, below are three options strategies (ranked by potential profit) and a comparative stock trade to consider should the price target be achieved at the target date.

Click on the strategy name below to access trade details using TradeBuilder on Powered by TradingBlock's TradeBuilder.

Strategy (click for details) % Return at Target Probability of breaking
even or better
Buy May Put Butterfly +195% 55%
Sell May Iron Condor +109% 51%
Buy May Put Condor +109% 51%
Sell Stock +2% 46%

* Click link to access TradeBuilder details on Must have Instant or Actual account. Subject to change due to changing market conditions. Click here to view risks regarding selling stock short.

DISCLAIMER: This content is provided for educational and informational purposes only. Evaluate any strategy prior to use to understand risk and suitability. TradingBlock does not endorse or warrant any Market Analyst content, service or product. Use this content at your own risk without guarantee or warranty of any kind from TradingBlock. Tim Biggam is a TradingBlock registered representative. He is not compensated by TradingBlock for any market research or analysis services. He currently does not hold any positions in MON.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: MON