Money Markets

Reading the Tea Leaves for CF Industries Holdings, Inc. (CF)

Most of the investors recently have been curious over the performance of CF Industries Holdings, Inc. (NYSE:CF) stock. Many experts agree that the truth about a stock is best reflected in the way it moves on the chart. For this stock, the chart has a lot to say about future performance.

How has the stock performed recently?

CF Industries Holdings, Inc. (NYSE:CF) in the last month has decreased -0.44%. Shares are now up over the past year, outperforming the broad market by -100% and underperformed a peer group of similar companies by -381%. After the latest session, which saw the stock close at a price of $36.17, CF sits below its 52-week high. CF Industries Holdings, Inc. (NYSE:CF) has been trading in a bullish manner, based on the relative positions of the stock’s 20 and 200 day moving averages.

Momentum indicators

Of course, these surface-level price movements don’t tell us much about the direction that CF may be headed in the future. If we want to get a sense of CF’s future performance, we have to look at the speed and size of these price movements. Using what are known as momentum indicators, we can use the stock’s price momentum to get a sense of whether the stock is in the midst of, or nearing the end of, a current trend. Two such indicators are the RSI (Relative Strength Index) and the Stochastic %k Oscillator, which fluctuate on a scale of 0 to 100. A reading above 70 indicates that a stock is overvalued, and a reading below 30 implies that it is undervalued. The 20-day RSI for CF is 50.39%, which suggests that the stock is not particularly expensive or cheap, and not predisposed to a reactive price movement based on this measure. The 20-day Stochastic %k measure, which sits at 29.66%, tells a different story, and suggests that CF currently trades in oversold territory.

What do the trading volumes reveal?

In addition to price, analysts use volume trends to predict future performance. The level of trading activity in a stock is often a good proxy for the level of interest and enthusiasm for the name within the investment community. A sudden increase in activity can be a sign that investors are trading in anticipation of a catalyst. CF Industries Holdings, Inc. (CF) average trading volume of 3,669,065 during the past month is 17% below its average volume over the past year, indicating that investors have been less active than usual in the stock in recent times.

What do the analysts think?

CF is currently undervalued by -1.04% relative to the average 1-year price target of $36.55 taken from a group of Wall Street Analysts. The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.60, which implies that analysts are generally neutral in their outlook for CF over the next year.

How risky is the stock? 

In order to put CF’s recent price performance into context, we need to get a sense of how the stock moves in relation to the overall market. Beta, which measures a stock’s price volatility relative to the market, provides the cleanest measure of systematic risk for a stock.

CF Industries Holdings, Inc. (NYSE:CF) has a beta of 1.17, compared to a beta of 1 for the market, which implies that the stock’s price movements are more extreme than the market as a whole. CF therefore has a above average level of market risk. During the past couple of weeks, CF average daily volatility was 39.02%, which is -4.24 percentage points higher than the average volatility over the past 100 days.

Previous ArticleNext Article