We said we'd wait until the close of the day today to decide whether or not we would stay in the fertilizer trade. Nothing about today's action had us running for the exits, so we're going to stick around. CF (chart above) continues to form a descending triangle, creating a strong resistance line. We're looking for a break of that line from all of the fertilizer stocks at the same time. That would be the ideal scenario.
After extremely strong earnings reports from CF and MOS last night, the p/e's of these stocks just dropped considerably. If the reports were so good, Snot, then why didn't the stocks reach new highs today? Have patience. Sectors go in and out of favor, for no particular reason whatsoever. If the fertilizer stocks rally three weeks from today, CNBC's talking heads will be chalking the rally up to continued strong earnings. The fact that they didn't completely break down today was what we were looking for.
The continued weakness in commodities cannot be ignored. As much as we'd like to see the fertilizer stocks make another run, we have to be realistic and accept that the world is crashing down all around them. It's troubling to see OIL break its 100dma. We expected that support level to hold, and perhaps give way to a rally. We are watching the fertilizer stocks closely to make sure they don't break down due to broad concerns about the current weakness in commodities.
Despite many warning signs, the fertilizer stocks are hanging in there. They are hanging on by a thread, but if they can weather this storm, they may come out of kicking. We're going to hang on to them until proven wrong.
11 comments:
Thanks for your thoughts Snot. I was nervous going into MOS earnings and sold yesterday @ 123 and change. In hindsight, perhaps I should have bought back this morning when it hit 117.
You're right in that the earnings were better than anyone could hope for, but the stocks still sold off a bit.
OIL hasnt broken its 113 dma, which appears to be the resistance line since june of last year. All the pieces are set for a huge oil/ag run.
On a side note, I'm getting no less than 5 buy signals on V. If it werent for all the hype surrounding V and possibly distorting my T/A, I would be calling for V at $100 very soon.
Five buy signals from Visa's chart? Could you elaborate, please?
I don't understand. What is the problem with the cheaper oil?
cheaper oil's better for the market, but the ferts trade roughly like commodities (especially to the down side), so cheaper oil may mean cheaper ferts.
I still think oil is in for a bounce, but I admit that if we don't see it tomorrow I'll be worried. If the ferts drop another 2 - 3% from here I'm scaling back.
Why not use stops, at a time like this?
Cheers
We don't use stops because we can watch the market, but we do hedge. Still holding SMN.
MOS found support at May's low near 114. If it breaks that support, its chart is going to look very bearish.
Not sure what the catalyst could be to send the fertilizer stocks to old highs (or new ones), but if they get there, they're going to do it very quickly.
snot, the mandate will be the catalyst. No doubt.
wow, CF is just 5 points shy of breaking that magic line. Of course, the ones I actually own (AGU, MOS, POT) arent doing so well...
And thar she blows. For those who sold on fear, let the self-kicking begin.
The market's holding out well against these spikes in oil... I'm almost feeling bullish there. But I think oil has more to show within the next couple days.
Might be premature, but I'm calling for a fert rally from here. The strength this morning is impressive.
Anyone else think the bottom is in? I just sold my SMN, which I hopefully won't regret.
Also, GRS is doing well. Thanks for pointing me there Clarke!
Cheers
You're welcome. GRS has been good to us and in quick time too. It remains to see, how much more legs it has.
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