Bolling: Traders Must Go by Intuition

Last Sunday, during a ritual morning run, I remember feeling a hint of a breeze that seemed more emphatic than usual. It wasn't obvious, but it was enough to elicit my brain to think, "Hey, maybe there is a change in the weather coming."

When I returned from the run, my neighbor mentioned that she thought the weather was turning; she could "feel it." We intuitively spot slight changes in the weather, consciously or not.

In a column that I wrote on June 11, I talked about a trader's intuition about trading activity in stocks of agricultural companies. Until that day, these stocks had been on a tear.

Shares of Potash (POT) had surged from $105 in January to $229 that day. Bunge sat at $122, Monsanto was trading $140 and Deere topped out at $82 per share.

I noted that although these ag stocks had been massively great performers leading up to that day, I was disappointed at the way they reacted to a very strong grain market underlying them.

Corn made an all-time high that day, and the soy complex (beans, meal and oil) was ripping toward record highs as well. However, my ag-play stocks: Monsanto (MON), Bunge (BG), Potash, and Deere (DE), were not responding.

At the time, I noted that the ag stocks were acting like the integrated oils. Underperforming their very reason for doing business and that underperformance against strong underlying commodity prices was a tipoff.

I sold calls on Monsanto, Bunge and Potash. I established that aggressive short position because -- and only because -- these companies were favorites of the Street. Any news item seemed to push them higher. They were resilient stocks that looked for reasons to go up.