Trading off MOS 2nd offering price 5/20/2011

5/31/2011 Update: Sold another 1/4 at 71.98 +6.88, leaving a tracker with stop under 69. 72 again proved to be a big level for MOS.

MOS has been under pressure and became the lagger in the Ag sector due to the Cargill overhang. On 5/19 afterhours, they announced the pricing of the secondary offering. Many stocks would see the relief once the offering is priced. I see that a lot in smaller companies where they would drop to the offering price and hold. Sometimes it would require a small base (2-3 days) and start going up again.

MOS was in play and it was on top of my list on 5/20.

May 19, 2011 /PRNewswire/ -- The Mosaic Company (NYSE: MOS) announced today that a secondary offering (the "offering") of 100 million shares of its common stock, related to Cargill, Incorporated's exchange of its approximately 64 percent interest in Mosaic with Cargill stockholders and certain debt holders, has priced at a public offering price of$65 per share.

I was expecting it to consolidate at the open and get a good ORB break up. That did not happen. It actually drove down fast with volume to 65, the secondary pricing. I was watching the stock to see if it actually reverse off the 65 level. Reversals off secondary pricing level is usually a great r/r trade and it has tendency to drift upwards. I entered long at 65.1 once the 5min bar reversal happened and simply placed a stop at 64.84. My first target is filling the gap at 66.24 (r/r of 4.38:1). My final swing target is 71.85/72 (see daily chart) for a r/r of 26R.

I sold 1/3 of my position when it filled the gap at 66.20 +1.1. I held the rest with the original stop at 64.84.

I sold another 1/3 on Friday at 70.28 (+5.18) when it is approaching the gap from 5/11. My stop now is under 68. I am still looking to sell MOS around 72.

This is an A+ setup - "in play" off news, good 2nd offering price pivot and very liquid stock with tendency to consistent multi-day moves.

Thought #1: Secondary pricing levels gives a pivot. I would not swing with nearly the size if it is a normal overshoot into big support play.

Thought #2: When MOS cleared 66.50 on 5/23 gave a nice daytrade setup into the close.

Thought #3: maybe MOS has bottomed and will make a higher low. That level could be 69. How should I play this? Buy into a pullback reversal off that level? Can 72 be taken out? 72 was a 4 month support level and 200D is around that level. The 50d is still curving down and will meet at 72 in a week or so.

- Chris