Price Forecast:

Bullish Case: Weyerhaeuser's price may rise due to increased federal support for the lumber industry and a robust housing market recovery, spurred by declining interest rates, leading to higher sales and improved earnings forecasts.

Bearish Case: Continued labor shortages and high interest rates could suppress lumber demand further, contributing to lower stock prices and earnings, compounded by global economic uncertainties affecting overall market sentiment.

Potential Outcomes:

1. Federal support boosts lumber prices (55%);

2. Continued labor shortages hinder growth (70%);

3. Stabilization of housing market (50%);

4. Price reaches $35 in 6 months (40%);

5. Further decline below $29 (30%).

Trading Oracle: Adopt a bullish diagonal spread by buying long-dated $30 calls and selling shorter-dated $32 calls. This harnesses elevated volatility while positioning for potential price increases. Target a 30% return, optimizing risk/reward with an estimated 79% probability of profit based on current market conditions.

October 23, 2024