Olam’s main business deals with commodities. The CRB closing below lows (208) will likely take the entire equity market with it. This makes commodity related companies prime candidates for shorting.
Olam has tested 1.48 and declined to current levels. With the CRB trading below lows of 208, we anticipate Olam continuing to slide further. However, Olam is oversold on a stochastic basis as is the CRB and there might be a small move up.
We advise investors to begin shorting Olam, taking half of their intended position. If Olam rallies, it should find mild resistance at 1.35 where investors can get a better price. The recommended stop would be at 1.50. By shorting in this manner, investors would be in a win-win situation. If Olam rallies, they get a better price, if it declines, the initial position is in profit and investors can gradually scale into their winning position with the remaining half.
The reason for shorting Noble is similar to Olam. We anticipate a slide in Noble as well because it is a commodity related company.
Nobel has dropped off after testing highs at 1.25. We advise investors to again, take half their position in Noble first, so that regardless of the move they will be positioned for a decline. Noble should have some resistance at 1.13 and we advise investors to sell the second half of their position if Noble reaches 1.13 again.
In the event Noble does not hit 1.13, investors can add on when Noble closes below successive support levels. The recommended stop is at 1.27.
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