Click chart to enlargeMosaic is at the bottom of its channel, above its uptrending 100dma. By all accounts, its uptrend is currently intact. Same for CF. Even more so for POT and AGU which are not even close to the bottoms of their channels. As a rule of thumb, stock charts don't make strong new highs and then go down forever. They make a series of lower highs before breaking down. If the Ag group were at the end of its growth cycle, then they would make a final stab at new highs and fall short of the mark before completely breaking down. If Mosaic's last run failed to produce a new 52 wk high, we would be nervous about its current position. Considering its last run was exceptionally strong, and other names in the group are even stronger, we feel that MOS has more life in it. That's purely from a technical standpoint. We're starting to put the other 50% of our cash into these names right now. We're not calling a bottom, but we feel comfortable adding to our positions here.
From a fundamental standpoint, we don't feel that the run in the Ag names is ready to end anytime soon. We also feel that with their low p/e's, they are not a bubble waiting to burst.
Starting to buy these names here and adding if they continue to drop makes sense in any diversified portfolio. This may not be the bottom, but we are sufficiently off the highs to start looking for bargains. We're partial to POT. We are strongly attracted to the highest relative strength stocks in a sector. Call it "best of breed" if you want. We'd rather buy POT when MOS is at the bottom of its channel than buy MOS itself. Either way, a small position here makes sense both technically and fundamentally.
Reminder... a little SMN goes a long way to hedge long Ag positions. If these names have one capitulative day, SMN could reach the low 40's. From a percentage standpoint, it doesn't take much SMN to insure a lot of MOS, MON, POT, CF, and AGU.
As for the indexes, it's anyone's guess where they go next. All we are certain of is that they are too high for the reality of the current U.S. economy. At some point, reality will win the tug-of-war.
11 comments:
geez....I don't know about this ag stuff and "adding if they drop" that seems to bring back memories of FXP which by the way I still own as I could not keep "adding as it dropped" Although it has been coming back. A bit more and I will be free :)
I know your best of the breed theory and I agree with that overall., but I bought some TRA and DE a few days ago as they were at the bottom of there channels. Now of coarse I have been taking a beating. DE looks particularly bad, I probably should have sold, but if you look at the RSI on both they are extremely oversold, much like MOS is. Looking at the history of both DE and TRA they are at or near the most oversold levels that ever occured odds seem to favor they will rise out of this. I can only hope.
and the other thing is...if we are not in Ag where are we going to go? Talking heads are saying Tech is the new mover. Not so sure that anything will lead the way if Ag falters. I may have to go back to all shorts.
Hmmmm. Snot, got a twin brother or a really good friend named Roger?
Link to the evidence
Squarpeg,
There's no doubt these Ag names could go a lot lower. Some Ultrashort exposure is a good idea. We are buying into the dip and will continue to buy as they drop. At some point, the market will rebound and the Ag stocks will be among the strongest stocks when that time comes. It's anyone's guess as to how much damage will take place between now and then. There's nothing wrong with buying 10 or 20% of your desired position and taking a wait-n-see attitude. Every time stocks reach the bottoms of their channels it looks like they'll never come back. Likewise when they reach the top, they don't look like they'll ever correct. If you can focus most of your buying during fearful times and most of your selling during greedy times, you'll profit overall.
DE doesn't look so bad. TRA looks bad. Its series of lower highs looks toppy. It is worst of breed, and has been for a while. POT is the FSLR of Ag, so we're overweight POT. It has the key ingredient, institutional support.
The FSLR of ag. lol. It's funny you should say that. Have you seen FSLR's chart lately? Looks like its about to be dethroned...
Actually FSLR is looking like a buying opportunity here, as the chart shows it's staying within it's channel, and is now at the lower end. The chart also shows that this slight selloff is just that...slight, with no conviction.
It's at 254 right now...let's see where it goes from here.
FSLR made new highs when STP, SPWR, etc didn't even come close. It has more relative strength than the other solars thanks to its wide institutional support.
POT has a similar following.
Everyone who bought fertilizer or ag stocks yesterday on Snot's advice, chime in together: "Hip, hip, hooray. Hip, hip, hooray."
Who was the genius who predicted FSLR will be dethroned based on their chart reading "skills"?
Take your sarcasm and rude comments and go back to the LDK board. Everyone has a right to voice opinions on the market.
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