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CF Growth & Income Trade Setup

CF (CF Industries Holdings Inc) is a fertilizer stock that has seen a lot of pricing pressure in its nitrogen business lately, the worst of which may or may not be fully reflected in the 67% drop in CF's share price over the last year. CF is scheduled to report earnings after the market close today so I'll wait to see how the stock trades tomorrow before listing the official entry criteria, profit targets & suggested stop for this trade but I did want to pass along this setup in advance for those that might be interested in rolling the dice on a potential short-squeeze trade as well as any Growth & Income investors that might want to start scaling in with a fractional starter position today before the stock reports earnings (my plan).

CF is currently yielding an attractive 4.91%, although there are no guarantees that the company will be able to continue to support the current dividend, especially considering the pricing pressures currently facing the fertilizer industry. Fundamentals aside, from a technical perspective, CF appears to be setting up within a bullish falling wedge pattern complete with positive divergences in place on the most recent low in both the MACD & RSI (daily chart).

From a longer-term perspective, CF is trading around a fairly significant support zone that runs from about 22.25 -24.00 (current price is 24.57). The bullish falling wedge can also be view on this time frame as well. One other potential bullish development is the extreme high short interest which has surged to about 29MM shares or 12.34% of the total float (shares available for trading). The high short interest coupled with the potential bullish setup on the charts tilts the odds in the favor of a positive reaction to whatever quarterly results & forward guidance CF issues after the market close today.

Once again, CF is only an unofficial trade idea at this time and any position taken in advance of earnings should be considered speculative, as the stock could experience a large gap in either direction when the market opens tomorrow. Additional commentary to follow tomorrow.

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Aug 3, 2016 3:41pm|Categories: Unofficial Long Ideas|Tags: |11 Comments

11 Comments

  1. Gaucho August 3, 2016 5:39 pm at 5:39 pm

    Hi Randy @rsotc, CF misses earnings

    CF Industries reported EPS of $0.33 and revenues of $1.134 billion . Analyst consensus had an EPS estimate of $0.68 and revenues of $1.13 billion .

    After hours is trading at $23.42. Does the support/stop out keeps at $22.25?

    Regards

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    • rsotc August 3, 2016 5:46 pm at 5:46 pm

      Don’t even pay the AH move much attention, especially in a relatively small company like CF. When the dust settles during the regular session tomorrow, I will post an update & decide whether to make CF an official trade setup or possibly an active gr & inc. trade, in which case I will provide a suggested entry price, stops & profit targets. Charts on this one are promising as a longer-term trade if CF doesn’t go too much lower but there are still some fundamental headwinds. Plus, let’s see if they mention anything tonight regarding the stability (or lack thereof) with the dividend going forward.

      1+

  2. ixtlanian August 4, 2016 12:04 am at 12:04 am

    @rsotc – hopefully tomorrow’s CF behaviour will also allow you to make a more definitive statement on related POT & MOS ideas now that both are past their earnings.

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    • rsotc August 4, 2016 11:47 am at 11:47 am

      ixtlanian- Yes. With earnings out of the way on most of the fertilizer stocks now, I’ll post an update on the sector soon, including POT & MOS, which are so far, selling down in sympathy with CF today. No signs of a reversal in CF so far & with the stock trading below the weekly support, I’m going to hold off adding it as an official trade idea for now. Let’s see how it (and the other fertilizer stocks) closes the day & then I’ll post an update.

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  3. j1persi August 4, 2016 7:08 am at 7:08 am

    Any significant comments about the dividend going forward? Didn’t get a chance to listen last night…

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    • rsotc August 4, 2016 9:41 am at 9:41 am

      j1persi- I didn’t read the entire transcript but did read the summary & couldn’t find any mention of the dividend. They are going to suspend (or terminate?) the share buyback program which will help to free up some cash & they made a couple other changes which should help to keep their investment grade ratings & shore up their liquidity. Here’s some details: http://www.businesswire.com/news/home/20160803006748/en/CF-Industries-Holdings-Reports-Quarter-Net-Earnings

      I did, however, see that they just declared the most recent dividend of 0.30 just a couple of weeks ago which means at least for the near-term, they don’t have an issue paying it or they probably would have reduced that one.

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  4. rsotc August 4, 2016 9:47 am at 9:47 am

    CF now trading at the bottom of a potential bullish falling wedge forming on the 60-minute while also just below the bottom of that L/T support on the weekly chart. On watch for potential reversal candlestick on the 60-minute, daily & weekly time frames.

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  5. Gaucho August 5, 2016 9:45 am at 9:45 am

    Hi Randy, @rsotc, I received this info yesterday night

    Cash Dividend [email protected]

    [email protected] (Name: CF INDUSTRIES HOLDINGS INC) announced a cash dividend with ex-dividend date of 20160811 and payable date of 20160831.

    The declared cash rate is USD 0.3.

    Regards

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    • rsotc August 5, 2016 4:16 pm at 4:16 pm

      Thx Gaucho. I had mentioned that in a reply above to j1persi (CF’s recent declaration of the next dividend payment at the rate of 0.30/share). That announcement was made not too far before the earnings release so I would assume the company was already confident in their ability to pay/sustain the dividend, at least for the foreseeable future.

      CF snapped back somewhat today & closed right about on the bottom of that daily wedge & within the long-term support zone so I’ll continue to watch it & may still add it as an official growth & income trade soon. Before then, I’d like to see the stock hold here or start to move higher & I’d also like to see the majority of the other fertilizer stocks to show some signs of stabilization or bullish price action. Individual stock picking & finding setups with attractive R/R‘s has been unusually tough lately so I’m being a bit more judicious with the official trade ideas.

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  6. Gaucho August 23, 2016 8:22 am at 8:22 am

    Hi Randy, @rsotc.

    This morning: UBS Upgrades CF Industries to Buy Rating from Neutral, Sets PT at $28; Shares Up 2% Pre Bell

    In the premarket is $24.45

    Regards

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    • rsotc August 23, 2016 1:35 pm at 1:35 pm

      Thx for passing that along @Gaucho. I covered CF in today’s ag sector video… looks good. Needs to break above 27.05 for a longer-term buy signal.

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