Potash - Trading the Good Stuff

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When You Have a Good Thing Going…

Keep doing it.

Since my first recommendation, I’ve traded in and out of POT 5 times. Each trade has been up 15-20% and with a holding period no longer than 2 weeks.

On Feb 18, I recommended trading Potash Corp (POT). On Feb 26, I wrote about how I made 27% on my POT option trades. I’m here to say the trade is not dead yet. I’m great at short-term trades and POT combined with this market volatility has given me many opportunities for some profitable short-term trades.

My most recent trades:

4/4/08 Bought Jan 09 $300 Calls @ $4.30
4/7/08 Sold Jan 09 $300 Calls @ $5.00 = 16% gain over 2 trading days minus commissions

4/7/08 Bought Jan 09 $300 Calls @ $4.50 - Is currently negative, but I believe it will pop back. I got in too early.

If you look at the chart you can see that POT has broken a ceiling of $165 that it has tested for the past 6 weeks.

This is bullish. However in the short-term I expect some retracement, probably not below $165, but certainly to the $170 range. The steep MACD line concerns me. As such I booked my profits, but then bought a position back at $4.50. I feel comfortable holding and waiting on this position. Some will certainly comment on certain options trading strategies for this, but the fact is I’m not a 10 in options-trading sophistication. What I do trade is what I know well and can do consistently.

In my 8 Tips to Emotionless Trading, #5 I say “Know your style”. I know my style and I’m able to trade profitably when I adhere to it. When I don’t I lose money.

I selected POT on fundamentals, but I purchased and sold on technicals. If I was a long-term investor I would have simply purchased the stock and walked away. Over the long haul though, you get dips and peaks. That’s where I like to trade. That’s my style.

A Great Long-Term Trend

Grain and food demand is increasing at above-trend rates due to the growth in the emerging markets. These regions have expanding middle classes with rising per capita food consumption. With food consumption increasing, food prices increasing, and finite land these countries look more and more to fertilizers to boost crop production.

POT has shown support around $154 recently. I won’t hold through earnings no 4/24. I simply don’t like the uncertainty since this stock has had quite a run. If you are braver than I you could hold through earnings and perhaps get an even bigger bang. Their is support around $150 from it’s 50-day moving average.