EOT Trade Alert – September 19, 2008
September 19, 2008
Trade Alert:
Buy CHD January 2009 $70 CALLS at $1.35 or better (CHDAN)
Company Background:
Church & Dwight (CHD) is a leading provider of household goods. The company makes a wide range of household, personal care, and specialty products under various brand names. Some of their more popular products include Arm & Hammer baking soda and laundry detergent, Arrid antiperspirant, as well as First Response and Answer home pregnancy kits.
Short-Term Catalyst:
Fundamentally, Church & Dwight is in a strong position. Last month, the company increased its guidance to “Wall Street” for both revenue and earnings.
The company is also well positioned to profit in several different economic environments. They’ll profit in a softening economy, or even an inflationary environment.
What interests me is their recent price action. They are a key member of a top performing industry group (consumer products) and they’ve moved higher over the last few months.
The stock’s been retrying the new 52-week highs recently (at the $65 level). A trend I expect the uptrend to continue for the next several weeks. All of the short term moving averages are in an uptrend, and the stocks well above the 50 day moving average.
We’ve seen a small pullback to the $62 level today which gives us a great entry point.
The institutional holdings numbers look good. Of the top 15 investors 10 have been actively adding to their positions – a great sign of continued strength.
I suggest quickly taking a position, and capturing the gains as it makes new highs.
Trade Details:
| Option Ticker Symbol: | CHDAN |
| Underlying Stock Symbol: | CHD |
| Current Bid-Ask Price: | $0.55 – $1.20 |
| Option “Buy Up To” Price: | $1.35 |
| Break-Even On Stock At Expiration: | $71.35 |
| Maximum Risk Per Contract: | $135 |
Exit Strategy:
CHD is trading at $62 a share. Support levels will be at $60 and $57.50. If the stock moves higher it will reach resistance around the psychological levels of $65 and $70.
Chart:
Category: EOT Trade Alert
