CF Industries Holdings, Inc. manufactures and distributes nitrogen fertilizers and other nitrogen products worldwide. The company operates through Ammonia, Granular Urea, UAN, AN, Other, and Phosphate segments. Its primary nitrogen fertilizer products include ammonia, granular urea, urea ammonium nitrate, and ammonium nitrate. The company also provides diesel exhaust fluid, urea liquor, nitric acid, and aqua ammonia as well as compound fertilizer product, such as nitrogen, phosphorus, and potassium fertilizer.
Take a look at the 1-year chart of CF (NYSE: CF) below with added notations:
CF had been trading sideways for the past couple of months. During that period of time, the stock formed a clear resistance level at $26 (green) and a strong level of support at $22 (blue). At some point the stock had to break one of the two levels created by the rectangle pattern, and yesterday the stock broke resistance.
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The Tale of the Tape: CF had a level of resistance at $26, the stock broke that resistance, and now that level should act as support. The ideal long opportunity would be at or near that $26 level. On the other hand, one could enter a short position on a break back below that level.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach