Home Site Map About Us My Account Shopping Cart Help Sign In

Sentiment Snapshot: Potash Corp. of Saskatchewan (POT)

Bearish bettors stalk POT on corn-related news

by Andrea Kramer (akramer@sir-inc.com) 1/13/2009 11:55 AM

Text Size |

Email a friend |

Print |

Keywords:

Put players pummeled Potash Corp. of Saskatchewan (POT: sentiment, chart, options) yesterday, as skepticism concerning the ethanol issue escalated in the wake of the latest report from the United States Department of Agriculture (USDA). After the release of the most recent estimates for corn supplies and ethanol demand, POT saw almost 41,000 puts cross the tape � more than doubling its average daily volume of fewer than 17,500 contracts.

Most of yesterday's bearish bets centered around the security's soon-to-expire January 2009 70 put, with nearly 5,000 contracts changing hands. This strike is home to significant put open interest in the front-month series, with roughly 6,865 contracts in residence. However, peak put open interest of nearly 9,000 contracts rests at the out-of-the-money January 100 strike, indicating that some of these pessimistic positions could be LEAPS.

Turning back to the potential catalyst behind yesterday's preference for puts, the USDA slashed its estimate for corn prices in 2009, as supply is expected to exceed demand. The government's National Agricultural Statistics Service reported that Midwestern farmers delivered the second-largest corn crop in U.S. history in 2008, revealing that while domestic supplies remain strong, global demand for grain and crop-based fuels like ethanol have weakened considerably.

As a result of the news, U.S. corn futures for March delivery closed down the 30-cent limit at $3.80-3/4 per bushel yesterday. In addition, March-dated soy futures closed down the 70-cent limit at $9.66, while wheat fell almost 10% as several futures months declined the daily 60-cent limit.

In parity with corn futures, the shares of POT sank into the red, too. The stock closed with a deficit of 9.9 points, or 11.82%, falling to 74.09. What's more, the security closed beneath double-barreled support at its 10-day and 20-day moving averages for the first session in more than a month. In early trading today, the shares are attempting to pare a fraction of their losses, and are currently combating the latter of these trendlines, hovering in the 75 area.

Daily chart of POT since December 2008 with 10-day and 20-day moving averages

From a more historical perspective, the equity is approaching yet another potential speed bump on the charts. Since peaking near the 230 level in mid-June 2008, the shares of POT have backpedaled more than 67% beneath resistance at their 10-week and 20-week moving averages. The stock eventually perforated the former of these trendlines in late December, but its 20-week counterpart remains looming overhead in the 90 level. A rejection from this second layer of resistance could smack the shares of POT lower.

Weekly chart of POT since June 2008 with 10-week and 20-week moving averages

However, despite the stock's significant decline in the latter half of 2008, analysts remain optimistic toward POT. The security currently harbors 6 "strong buys" and 2 "buy" ratings, Zacks reports, compared to only 2 "holds" and nary a "sell" in sight.

What's more, Thomson Financial reports that the average 12-month price target on the equity stands at an ambitious $118.24 � a level the stock hasn't closed a week above since mid-September. In order to attain this generous target, the shares would need to rally approximately 58% from their current trading range.

Meanwhile, regardless of yesterday's influx of bearish bets, near-term options traders are skewed toward the bullpen. The stock's Schaeffer's put/call open interest ratio (SOIR) currently rests at 0.57, indicating that calls outnumber their pessimistic rivals among options with less than 3 months until expiration. This reading ranks in the 24th annual percentile when compared to similar ratios during the past year, indicating that short-term options speculators have been more optimistic toward POT less than a quarter of the time during the past 52 weeks.

In conclusion, should the shares of POT get rejected from double-barreled resistance on the charts, or should corn-related woes continue to haunt the industry, the lingering bulls could get spooked. An unraveling of optimism � whether via additional put-plays in the options pits, or a fresh round of downgrades and/or price-target cuts � could further exacerbate the security's technical troubles.

Enjoy Sentiment Snapshot? Now, you can get it sent directly to your inbox. Simply click here to sign in, select "author" from the first box, determine how often you'd like to be alerted, and enter "Andrea Kramer" into the third box. Easy as 1, 2, 3!

Discuss this article:

Post your own comment

Options Stew: A Taste of the Week's Spiciest Plays

(11/20/2009 10:45:27 AM)

Welcome to our new video series, Options Stew, where we take a look back at what's been cookin' in the option pits this week. Join us as we sample just a few of the unusual option plays from the past week, with our "recipe" broken down into three unique segments:

read more...

Schaeffer's Media Outtake: Thoughts on Hedging, Volatility

(11/19/2009 4:15:00 PM)

"Standard & Poor's, the world's leading index provider, announced today the launch of the S&P 500 Dynamic VEQTOR Index which dynamically allocates between equity, volatility and cash to provide broad equity market exposure with an implied volatility hedge. 'Implied equity volatility typically has a strong negative correlation to equity market returns, and is considered a useful tool to hedge against the potential downside risk of the broad equity market,' says Liz Taxin, Director of Strategy Indices for S&P Indices. The S&P 500 Dynamic VEQTOR Index is comprised of three components: Equity, as represented by the S&P 500; Volatility, as represented by the S&P 500 Short-Term VIX Futures Index; and Cash, as represented by the Overnight LIBOR rate. The Index allocates between equity and volatility based on the combination of realized and implied volatility trend decision variables, and these allocations are evaluated on a daily basis."
(PR newswire � 11/18/09)

read more...

Put Trading Swells on J. Crew Group Ahead of Earnings

(11/18/2009 11:05:48 AM)

Retailers continue to line up for the earnings confessional, and one particular high-flyer is slated to release its quarterly report next week. J. Crew Group Inc. (JCG: sentiment, chart, options) is known for its preppy fashions, including jeans, khakis, and other basic (but often pricey) items sold to young professionals. J. Crew sells through its catalogs, Web sites, and some 300 retail and outlet stores in the U.S. under the J. Crew, crewcuts (for kids), and Madewell banners. Madewell, launched in 2006, is a women's-only collection of hip, casual clothes.

read more...

Drilling Down on Rowan Companies' Rally Prospects

(11/18/2009 10:00:00 AM)

Rowan Companies Inc. (RDC: sentiment, chart, options) performs contract drilling of oil and gas wells. Its fleet consists of 22 jack-up rigs and 32 land-drilling rigs. The company operates primarily in the Middle East, Texas, the Gulf of Mexico, and the North Sea.

read more...

Drug Delay Prompts Put Trading on ISIS Pharmaceuticals, Inc. (ISIS)

(11/17/2009 1:50:13 PM)

Bearish option bettors have virtually blitzed ISIS Pharmaceuticals, Inc. (ISIS: sentiment, chart, options) today, with intraday put volume skyrocketing to nearly 38 times the norm. The pharmaceutical firm this morning confessed that it's delaying plans to seek approval for experimental drug mipomersen by nearly a year, from mid-2010 to mid-2011.

read more...

Pre-Earnings Option Activity Accelerates on Sears Holdings Corporation

(11/16/2009 1:55:56 PM)

Sears Holdings Corporation (SHLD: sentiment, chart, options) has been a hot topic on both sides of the options aisle today, as investors race to place their bets ahead of the retailer's looming turn on the earnings stage. According to Thomson Reuters, the firm is expected to report its third-quarter figures before the opening bell on Thursday, Nov. 19.

read more...

Options Traders Bulk Up on Puts on Software Vendor

(11/13/2009 12:34:23 PM)

Options players are placing some heavy bets that salesforce.com inc. (CRM: sentiment, chart, options) is going to suffer a disappointing earnings report next week, as traders load up on puts. The International Securities Exchange (ISE) has reported 2.7 puts purchased to open for every one call purchased to open during the past 10 trading sessions. This ratio of puts to calls is higher than 93.8% of all those taken during the past year. In other words, puts are significantly more popular than calls among traders.

read more...

Hopes Are Riding High for GameStop's Earnings

(11/13/2009 11:35:33 AM)

The video game sector is struggling. U.S. video game sales dropped by 18% in October compared to the same period last year, according to the latest data from NPD Group. Meanwhile, analysts had forecast a more modest decline of 11%.

read more...

Options Stew: A Taste of the Week's Spiciest Plays

(11/13/2009 10:55:42 AM)

Betting on a Short-Term Bounce for First Solar, Inc. (FSLR)

(11/12/2009 3:15:41 PM)

Call traders have been fond of First Solar, Inc. (FSLR: sentiment, chart, options) today, despite the solar concern's retreat into the red. In afternoon trading, the security has already seen roughly 18,000 calls cross the tape � nearly tripling its average intraday volume of fewer than 6,250 contracts.

read more...

SchaeffersResearch.com can alert you to new articles containing your favorite authors, ticker symbols or keywords. Enter your favorite authors, ticker symbol or keyword and click go.

Today's Most Popular Stories

Read

Emailed

Editor's Pick

Schaeffer's Media Outtake: Thoughts on Hedging, Volatility 11/19/2009 4:15 PM

Options Edge: Goldman Sachs, Nokia, DryShips, and NIKE 11/20/2009 9:29 AM

The Option Coach: Strategies in Review 11/20/2009 1:25 PM

Trading Tools to Build Your Portfolio: A Bearish Bet on Best Buy Co., Inc. 11/20/2009 3:00 PM

Featured Companies

Potash Corp Of Saskatchewan (POT)

Add to Watchlist

Add Alert

Receive FREE access to Schaeffer�s

premier online options magazine!

Podcasting

Videocasting

	Schaeffer's Daily Q&A: What Is Put Selling Nov 20 2009 4:12 PM
Options Stew: A Taste of the Week's Spiciest Pl... View More...

Partner Center

<script language="JavaScript" src="http://c5.zedo.com/jsc/c5/ff2.js"></script><noscript> <a href="http://xads.zedo.com/ads2/r?n=457;c=166;s=1;x=1024;u=j;z=[timestamp]" target="_blank"><img border="0" width="120" height="60" src="http://xads.zedo.com/ads2/x?n=457;c=166;s=1;x=1024;u=j;z=[timestamp]" alt="Click here"></a> </noscript>	<script language="JavaScript" src="http://c5.zedo.com/jsc/c5/ff2.js"></script><noscript> <a href="http://xads.zedo.com/ads2/r?n=457;c=167;s=1;x=1024;u=j;z=[timestamp]" target="_blank"><img border="0" width="120" height="60" src="http://xads.zedo.com/ads2/x?n=457;c=167;s=1;x=1024;u=j;z=[timestamp]" alt="Click here"></a> </noscript>	<script language="JavaScript" src="http://c5.zedo.com/jsc/c5/ff2.js"></script><noscript> <a href="http://xads.zedo.com/ads2/r?n=457;c=168;s=1;x=1024;u=j;z=[timestamp]" target="_blank"><img border="0" width="120" height="60" src="http://xads.zedo.com/ads2/x?n=457;c=168;s=1;x=1024;u=j;z=[timestamp]" alt="Click here"></a> </noscript>	<script language="JavaScript" src="http://c5.zedo.com/jsc/c5/ff2.js"></script><noscript> <a href="http://xads.zedo.com/ads2/r?n=457;c=169;s=1;x=1024;u=j;z=[timestamp]" target="_blank"><img border="0" width="120" height="60" src="http://xads.zedo.com/ads2/x?n=457;c=169;s=1;x=1024;u=j;z=[timestamp]" alt="Click here"></a> </noscript>
<script language="JavaScript" src="http://c5.zedo.com/jsc/c5/ff2.js"></script><noscript> <a href="http://xads.zedo.com/ads2/r?n=457;c=174;s=1;x=1024;u=j;z=[timestamp]" target="_blank"><img border="0" width="120" height="60" src="http://xads.zedo.com/ads2/x?n=457;c=174;s=1;x=1024;u=j;z=[timestamp]" alt="Click here"></a> </noscript>	<script language="JavaScript" src="http://c5.zedo.com/jsc/c5/fo.js"></script><noscript> <a href="http://xads.zedo.com/ads2/r?n=457;c=171;s=1;x=1024;u=j;z=[timestamp]" target="_blank"><img border="0" width="120" height="60" src="http://xads.zedo.com/ads2/x?n=457;c=171;s=0;x=1024;u=j;z=[timestamp]" alt="Click here"></a> </noscript>	<script language="JavaScript" src="http://c5.zedo.com/jsc/c5/ff2.js"></script><noscript> <a href="http://xads.zedo.com/ads2/r?n=457;c=172;s=1;x=1024;u=j;z=[timestamp]" target="_blank"><img border="0" width="120" height="60" src="http://xads.zedo.com/ads2/x?n=457;c=172;s=1;x=1024;u=j;z=[timestamp]" alt="Click here"></a> </noscript>	<script language="JavaScript" src="http://c5.zedo.com/jsc/c5/fo.js"></script><noscript> <a href="http://xads.zedo.com/ads2/r?n=457;c=173;s=1;x=1024;u=j;z=[timestamp]" target="_blank"><img border="0" width="120" height="60" src="http://xads.zedo.com/ads2/x?n=457;c=173;s=0;x=1024;u=j;z=[timestamp]" alt="Click here"></a> </noscript>

Monday Morning Outlook:
Prepare for the investing week ahead. Every week, Bernie and his staff provide you with their insight about what has happened and, more importantly, what will happen in the market. We dig deep and show you what's happening behind the scenes, and tell you which indicators are predicting major market moves.

Market Recap:
At the end of every market day, we review the trading day in detail, covering major events and key market developments. Don't miss this critical, timely and insightful report.

Opening View:
Every morning, our research staff analyzes the prior day and the overnight markets, and monitors the morning wires to give you an accurate preview of the day to come. delivered to your inbox before the opening bell.

First Name Add your first name Last Name Add your last name Email Add a valid address Password Min. size 4 chars

I would like to be contacted periodically by Schaeffer's Investment Research concerning its own products and services, and those of carefully selected advertisers. I understand that I can opt-out of further messages at any time.

� 2009 Schaeffer's Investment Research, Inc. 5151 Pfeiffer Road, Suite 250, Cincinnati, Ohio 45242
Phone: (800) 448-2080 FAX: (513) 589-3810 Int'l Callers: (513) 589-3800 Email: service@sir-inc.com

Sentiment Snapshot: Potash Corp. of Saskatchewan (POT)

Bearish bettors stalk POT on corn-related news

by Andrea Kramer (akramer@sir-inc.com) 1/13/2009 11:55 AM

POT

stocks

options