Is Monsanto (MON) tiring out? Here’s your trade. (May 26, 2016)

by DAN MON 
Monsanto ( NYSE:MON ). The reason I’m covering this is, remember they got an offer, it was an unsolicited bid from Bayer ( ETR:BAYN ) for $122.00 a share, and they turned it down. So then my suggestion was, the stock gaps up here and then it trades down, that tells you that (this was before they turned it down) the market is not believing that this stock is going to trade for $122.00 a share, so you don’t want to be long. Then the very next day, Boom! You have to look and say, “Well now the market is telling me something different. Now this is moving higher so I want to be a buyer.” You don’t want to be shorting this stock, not when it moves higher above the prior day. And now we have this though, you can call that a shooting star I guess, more than a bad company song, or a spinning top I guess.

The bottom line is, this is, in my view, almost kind of like a climax top. Now this is totally headline sensitive. Tomorrow maybe somebody is going to come in for an offer for 125.00 or 130.00. So you always have to be careful of that. But after this stock, it’s like gap, watch, big gap here, and then another gap here, then another gap here, then another gap here. These are like these breakaway gaps that are occurring above this congestion. So it’s like one breakaway gap after another and then we get this kind of reversal. Decent volume, not huge, but this looks to me like the buying activity has kind of petered out. All of the aggressive buyers have kind of done their business and now the stock is rolling over.

So here’s the thing, I wouldn’t short this stock, again, just because of the headline risk; you can get another offer coming in. But if you’re long the stock I would be SERIOUSLY having a tight stop on this. Intraday, this was a higher high, a higher low and now we’ve got a lower high and a lower low intraday. This is a reversal pattern to me. I couldn’t tell whether this is going to go all the way down, but I’m just talking about as a trade. If you were long this stock you need to take that money off the table. You can always buy it back, but this will turn out to have been a pretty good trade on the acquisition that never was or that at least hasn’t been so far.

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