Click chart to enlargeMost of the Ag stock charts look similar to the chart of CF above. We did a lot of selling this morning. We may have to sit back and watch these stocks go a little higher, but we're confident that at the very least we'll be able to buy them back at today's prices at some point in the future. Of course the hopes are that they'll retreat to the bottom of their channels where we'll buy them back cheaper. We sold CF, MOS, AGU and some POT. We're still holding some POT because it's best of breed and it even comes with a memorable slogan "It's illegal to sell POT". That's worth another 5 points at least. Our short term target for POT is 250.
We should probably stay out of the market until these stocks consolidate their recent gains. It's more likely, though, that we'll trade them as they drop, particularly if they have large one-day losses. This type of trading is just a series of small, fun trades to pass the time until the next real move. It's the big moves (like the one we just traded) that really advance your bottom line. Although we were only approx 70% invested for this last move, our portfolio gained 15.5% overall since late May. It only takes 3 moves like this each year to post incredible gains.
We're holding MTL which looks like it just broke out to the upside today. OIL is at the center of its channel, so it has no predictive value for the next Dow move at this point.
16 comments:
Note that at the end of May, MTL failed to break its previous high. Also note the lower lows on the rsi trendline. In fact the more I look at MTL the more I dont like it, even though it does look like its got a bit of life left in it short term. But I would be leery of MTL at this point. I would be surprised if it goes higher than 57.
MTL's May highs took out April's highs, though. The highs at the very end of May could just be seen as being part of the consolidation of the run it had from the beginning of May. We don't have a lot in MTL either way. If it fails to make new highs, it will likely be because the Dow looks terrible. The Dow looks like its heading for a retest of its Jan/March lows. Weakness in the broader market can kill MTL's rally. Hopefully if the market retests the lows, we'll have a big capitulation day at the bottom that makes Ag correct substantially, if only for a short time. May sell some more POT soon. Approaching 240.
Congratulations Snot! Your patience in the Ag names has paid off in spades. A +15.5% addition to the bottom line in what I imagine was a very large number to begin with is outstanding, and something I am trying to learn from but am having difficulties. I can't seem to stick with CF or POT for more than a few days at time because they run up so strong and fast I'm always afraid I'll end up giving back my gains.
If you don't mind me asking, how long did it take you to learn to exercise such patience? And how long have you been trading overall?
Thanks for your postings, they've been a great help.
Craig
Craig, we've been trading for 15 years. The patience thing is just a matter of having faith in the system. By selling today, we're not outright calling an exact top. We're just confident that at some point these stocks will correct. If they start correcting tomorrow, great. If they run up another 20% and then correct 20%, that's fine too. As long as after they correct they're at the bottom of the channel, we'll buy them back at the same price we sold them at. In the meantime, we'll collect interest instead. We've learned that trying to profit from a run-up above the channel only works a small percentage of the time. Most often, it's a good way to lose money. We posted a chart here once that showed how different your results would be had you bought and sold just a few days earlier (or later), basing your decision strictly on the trend channel. In one instance, you broke even after a few months. In the other, you doubled your money in a few months.
Waiting for the right price is really what pays off in spades. And if you buy at the bottom of the channel, having patience when it reaches the midpoint is easy. if it slips, you just wait a little longer. Eventually, if you've chosen the right stock/sector, you'll have a chance to sell at the top. It does look a lot easier than it is, but after you've done it a few times, the patience part just feels right.
I'm even more impressed with CF than with POT. CF has run up over 40% whereas POT has only run up 30%. I remember saying CF looked like it was headed straight for $170. I'm just amazed it actually did. I think this is about the end of it though. I got out yesterday... had to buy some ASTI at $11. And now RIO is lookin really good.
I agree the AGs have had another impressive run and due for a pullback. I'm having trouble reading the dry bulk shippers (i.e. DRYS, TBSI).
Snot, in your (1) long strength and (2) short weakness, what sector is best to short at the present in your opinion?
For those who think Cramer is a contrarian indicator, the ag top should pretty much be in for this run, since Cramer just announced that fertilizer stocks are going to continue to work. To be fair to Cramer, though, he does usually stress a longer-term perspective, rather than a window of a week or a month like a trader. But if ag starts correcting this week, it will be fun to point to this article and its date.
Link to part of the article; some is only for subscribers
We don't currently have a sector to short, but some individual stocks have been on our short list for some time. CROX and BCSI are on that list. For that matter, any stock trading below a downtrending moving average (preferably within a clear trend channel) is a short as it nears the top of the channel. The same rules apply to shorts as to longs, just in reverse.
Thanks for the Cramer link. Cramer is often criticized for poor short term timing while his intermediate term timing is actually pretty good (with the exception of SHLD!)
Considering the strength (and new highs) of this most recent Ag run, we feel strongly that there will be another tradable move later this year after the next correction. It isn't until a rally fails to put the stocks at new highs that there is any reason for concern.
Just for fun, here is where we feel the Ag stocks will top out:
CF 174
MOS 166.5
POT 252
AGU 117
These are the prices at which we would feel comfortable adding to SMN, and perhaps picking up some AGA despite (as one poster pointed out) it's not a direct relation to the fertilizer names.
MTL downgrade from Goldman? What kind of downgrade from 61 to 60.10...why even bother?
GS downgrade going to put tremendous pressure on MTL.
.90 downgrade will put tremendous pressure on MTL?
Farm bill passed over Bush's veto. How will this affect ag stocks?
Link to Yahoo news story
JSW
AGA already up 7.4 % and ag has only just begun to roll downward
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