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Two Ways To Play: Tears For Sears


Strengthen your portfolio in good times and bad.

Food Costs Likely To Continue

According to The Wall Street Journal, the Organization for Economic Cooperation (OECD) said in a report today food inflation will likely benefit emerging economies as world trade increases and as farmers continue to invest in modern seed, equipment, and fertilizer. Countries such as China, Brazil, and Argentina will benefit most as prices are expected to rise for those components while world trade increases by at least 20% in the coming decade. The OECD said it expects these countries to dominate production and consumption of most commodities with the exception of select coarse grains and dairies by 2017. See the related article, Fertilizer Firms Cash In by Professor Andrew Jeffery.

From the Bull Pen: Bulls can continue to play the upside in the Ag plays. One option might be Agrium (AGU); sell-stops can be set near yesterday's low ($81).

From the Bear Cave: Those bearish can play the downside in the Agriculture ETF (DBA); buy-stops can be set above $38.

Sears Reports Bigger Loss

Sears Holdings (SHLD) reported a first quarter loss of $0.53 per share. The figure was 68 cents worse than analyst expected. According to the WSJ, the company, which gets around a third of its sales from home goods and appliances, reported a 5.8% decline in revenue to $11.07 billion. Analysts were expecting $11.41 billion in revenues. Gross margins fell to 27.3% from 28.2% as the company increased markdowns, and same store sales in the U.S. fell 8.6% with declines across "most major categories" and notable weakness in its home appliance, lawn and garden, and apparel categories. Minyan Peter mentioned Sears recently in Target A Slave To Two Masters.

From the Bull Pen: Sears was higher in the premarket. Reaction to the news is more important, and the double bottom near $85 also adds to the bull case. If the buying continues, bulls can play the upside with sell-stops below that level.

From the Bear Cave: Bears might see a better downside retail play in American Eagle (AEO) with entry points near the $19-20 range.

For more ideas in real time throughout the trading day, check out Minyanville's Buzz & Banter.

Quick Check Around the World

Asian trading closed with the Hang Seng +0.55%, Nikkei +3.03%, Sensex -1.27%, Taiwan +0.22% and Shanghai -1.66%.

Glancing towards Europe, we see the CAC +0.13%, DAX +0.14%, FTSE +0.42%,

A Look At Commodities

Commodities are lower. Crude oil is down -1.06 to 129.94. Gold is down -8.60 to 891.90. Silver is lower -0.250 to 17.165, and copper is lower -9.50 to 362.90.

The dollar index is higher +0.268 to 72.819.

On the Radar

GDP (Q/Q): 0.9% inline.
Personal Consumption: 1.0% inline.
GDP Price Index: 2.6% inline.
Core PCE (Q/Q): 2.1% inline vs. 2.2% cons.

Click here for the full trading radar.

Good luck!
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No positions in stocks mentioned.

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