EOT Trade Alert – May 6, 2011

| May 6, 2011

May 6, 2011

Trade Alert:

   Buy POT September 2011 $60 Calls at $2.25 or better

Company Background:

Potash Corp. Of Saskatchewan (POT) is an agricultural chemicals company.  The company mines and produces potash.  Their fertilizers and related products are sold primarily in the United States and Canada.

Short-Term Catalyst:

The current business environment for POT is a thing of beauty.  It should send their stock soaring to new heights in the weeks and months ahead.

Here’s why…

Right now, global demand for fertilizer like potash is skyrocketing.  Just look at their latest earnings…

POT recently reported record first quarter earnings of 84 cents per share… a 71% increase from the same period last year.  And revenues soared to $2.2 billion from $1.7 billion a year ago.  That’s some impressive growth…

And here’s the best part… according to Potash’s CEO, Bill Doyle, global demand for potash will continue to accelerate.  As demand accelerates, it will drive the price of potash up and make POT more profitable.

Here’s the bottom line…

Global grain supplies are tight and commodity prices are high.  As a result, farmers around the world are pushing as much land into production as possible.  They want to cash in on record high commodity prices.

This brings a lot of marginal farm ground into production.  You see, farmers will plant crops in the most productive land first.  This land doesn’t require as much fertilizer and produces more profits for the farmer.

However, when commodity prices are high like they are right now, farmers can afford to pay for the fertilizer they need to produce crops on less productive land.  But here’s the thing… it takes a lot of potash and other fertilizers to make it happen.

Simply put, the current environment in agriculture is a boon for POT.  I think we’ll see massive revenue and earnings growth this quarter.  And that should send shares of POT soaring… Let’s grab call options on POT now to profit.

Trade Details:

Underlying Stock Symbol: POT
Current Bid-Ask Price: $2.08 – $2.14
Option “Buy Up To” Price: $2.25
Break-Even On Stock At Expiration: $62.25
Maximum Risk Per Contract: $225

Exit Strategy:

POT is trading at $53.36 per share.  Resistance levels will be at $62.50 and again at $70.  Remember, we want this stock to move higher.  Support levels will be at $50 and $48.  Conservative investors should look to exit at the first support or resistance level. Aggressive investors may want to hold for a bigger move.



Category: EOT Trade Alert

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