Trade Review - SFD - May, 29

Stock Selection Information

• Heard during Smithfield Foods' (SFD) conference call: Execs say the sale to a Chinese company is "good news" for the pork industry as a major U.S.-based food company ties in with an extensive Chinese distribution network. They also note Shuanghui sells in other major Asian markets such as Japan and Korea. Both CEOs reiterated that Smithfield's business and operations will remain largely the same. (webcast)
• More on the Smithfield Foods (SFD) acquisition: Under the seemingly generous terms of its deal to be acquired by Shuanghui International, no Smithfield facilities or locations will be closed and the existing management team will remain in place. The board indicates it expects resistance from U.S. regulators and has a breakup fee embedded as part of the deal - but with pork products flowing from the U.S. to China - (instead of the reverse) - landing approval may be easier than in prior U.S.-China mergers. SFD +25.1% to $32.49, 4.6% below the deal price.
• Smithfield Foods (SFD) confirms it sold itself to Shuanghui International for $34 per share in a deal valued at $7.1B. The transaction is slated to close in the second half of 2013 after regulators weigh in. SFD +25.9% premarket to $32.70.
• UPDATE: Shuanghui Intl., Smithfield Foods Agrees to Combination, SFD Holders Will Receive $34/Share in Cash
• Smithfield Foods (SFD) is close to selling itself to China's Shineway, according to a WSJ report. A deal would land in the $4.5B to $5B range to mark a 25% to 30% premium over Smithfield's closing yesterday. SFD +23.2% premarket to $31.99.

Watch List Reason - Had relevant news in the morning, big gap up and great pre-market volume

Pre-Market Volume - 320%

Trading Plan - To go long above 27.00

Management

Entry Setup used: Many different entries.

Trading Comments

Tape reading was extremely useful today with this stock. It was clear that there was a very strong buyer at the stock. From time to time we could see prints greater or equal a 1500 done at the bid, and prices would just not drop. That gave me a lot of confidence to trade the stock in the morning. First half hour I don´t care about about what the market is doing, after that it confirmed that would try to move higher, which also helped the confidence in the up move. So I was building a position around and had a good position when above the up trend line. I was expecting it to explode at some point due to the amount of volume the buyers were taking, which never happened when I was positioned. When it broke the up trend and the 32.58 buyer dropped I closed the position with some profit.

Evaluation

I did a great job in sizing up and building the position at the stock. My trading plan was good and I executed it correctly, the trade just did not worked as expected. I was in control of my risk and adding / taking profits as the stock was moving up, manage to have a very strong position with a very good price on the stock.
Tape reading was critical to this trade cause I could see the buying pressure on the stock.
I also manage to be positive on the stock and for future trades, if I am able to execute as well as I did today, I am sure it will pay off big time.
Note: in the afternoon the stock move a 1.25 on an explosive move, probably because of the amount of buyer it had in the morning.