BG is Trading Below its 50- and 200-Day Moving Averages

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This morning I’m recommending a bearish trade on Bunge Limited (NYSE:BG), a global agribusiness and food company.

The major indices pulled back slightly yesterday, though my indicators continue to give strong bullish readings. As of this week, the S&P 500 has now retraced roughly 75% of the losses it incurred in the fourth quarter of 2018. I’ve mentioned before that bear-market rallies typically retrace about 50%-75% of the prior downside move.

With that in mind, this still looks like a potential “bull trap” to me, so I am recommending a bearish put option as protection in case yesterday’s pullback turns into a more meaningful decline.

A Global Slowdown is Bad for BG

The European Central Bank (ECB) is all out of options when it comes to stimulating that region’s economy. Interest rates are at or below zero in many countries around the world, leaving them with no additional tools to fight an economic slowdown.

I also don’t see a positive resolution to the U.S.-China trade situation. Even if a deal gets done, I don’t think it’s going to change much in terms of the outlook for the global economy. In my view, China is not going to be willing to give up any meaningful concessions to the United States on trade.

BG has offices, packaging facilities and refineries all over the world, with heavy concentrations in Europe and Asia. BG has so much international exposure that a global slowdown will affect its performance. And right now, the technical picture looks just as bad.

Making Lower Highs Since October 2018

If we look at a daily chart for BG, we see that it is trading below its 50- and 200-day moving averages (MAs). Since it crossed below its 50-day MA in November of 2018, BG has been consistently making lower highs, and it hasn’t tapped its 50-day MA in all that time.

Daily Chart of Bunge Limited (BG) — Chart Source: TradingView


BG is starting to find some support at just below the $52.50 level, but it also has a lot of overhead resistance. If it does tap its 50-day MA, it could be sent back down below support, and we would have a chance to collect profits. Therefore, I’m recommending a put option on BG.

Buy to open the Bunge Limited (BG) April 18th $52.50 Puts (BG190418P00052500) at $1.45 or lower.

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