Click chart to enlargeThe chart above is a two year logarithmic chart of POT. As much as its current action is a nail-biter, we have to keep things in perspective until proven wrong (which may happen tomorrow) . Despite the recent slump, POT has yet to close decisively below its long term trend channel. We don't have to tell you how critical these support lines have now become. The longer they are, the more significant a break of them ultimately is. We are at an extremely critical point in POT's cycle, where the next few days literally decide its fate for the next several months. If support is broken, it will either go the way of CROX, or it will consolidate sideways for many, many months before regaining the confidence of investors eventually allowing it to move higher. While a consolidation like this is a healthy and necessary part of a company (and its stocks) natural growth cycle, we never stick around for them because the risk outweighs the reward. We've found that most stocks that break through the bottom of their trend channels never make new highs again. The euphoria that brought them to their peaks is rarely re-created. Companies that do have multiple bull runs go on to become the largest companies in the world. They are the AAPL's, MSFT's and GOOG's. For every one of them, there are hundreds of one-hit wonders that simply disappear into the annals of stock market history. There is no reason to place a bet with those odds, which is why when most stocks break support, they crash and burn, never to be heard from again.
27 comments:
Snot...a few questions...did MOS close below the channel? If AGS fail what other sectors are you looking and finally do you manage a fund?
Like I said in my other post I am all in at 141ish and debating if I should just take the lost and move on..I may wait until Monday afternoon and decide.
Yes, MOS closed below the channel and its moving average. But we need to lose more than just MOS to decide the fate of these stocks. If we lose one or two more, then you can start to worry.
There are no other sectors we're looking at right now. It takes a long time for these "ideal" stocks to form. We've been trading the Ag stocks for over a year. There may be sectors right now that are shaping up to be the next big thing, but we're not aware of any yet. If these stocks fail, the market will be left with no leadership. Typical of a bear, actually.
We don't manage a fund, we manage individual and corporate retirement accounts.
Lastly, you don't just take a loss. You minimze the loss by trading around it. Do you own any SMN? The thinking there is that if fertilizer really tanks, everything will tank with it, so even a small amount of SMN will pay off very well because of the huge percentages involved. If fertilizer rallies, it's likely to be a rally limited to fertilizer, so SMN will not kill your profits. Fertilizer is the last hold-out of the former bull market. If it gives in, we will be engulfed in a completely hopeless bear market for some time. It's a good time to stay out and start your research for the next bull run. If you are new to trading, sorry you are catching the end of the cycle. Fertilizer was the last hiding place, but whether or not it continues to be a safe haven from the BSC, C, MER, LEH, CROX, MTL type of minefields that are out there is anyone's guess.
One other thing... MOS will rocket straight up to new highs 10 seconds after you sell it, so please post here when you sell so everyone knows when to buy:)
Snot...you are right it will rocket up as soon as I sell..thanks for putting a smile on my face.
I dont own any SMN..is it to late to buy SMN?
I have hope for MOS especially after I read that Cramer said to "sell"...
It's never to late to hedge a bet. It's just insurance. You don't need a lot of it, it just buffers you in the event of a crash. You can get rid of it if things improve, perhaps after Monday's reports if these stocks can keep their heads above water until then.
You're right, Cramer is the greatest contrarian indicator of our time. He's been pumping SHLD (Sears Holdings) for over a year and it has gone nowhere but down. His friend manages the company. Remember, Cramer is not out to make money, he's out to make friends.
Hey Snot,
I don't wish to jinx AGU, but there were a few bullish signs intraday yesterday, that suggest that AGU may survive this iteration. I hope we get confirmation today. All hope is not lost yet.
Unfortunately, I am not familiar with TA, which decide a stock breaks its bottom channel, especially intra day signals.
As for a nice bounce play, I love UNG here. Your thoughts?
Isn't it more likely that instead of being "toast", ag is simply consolidating and moving towards a gentler sloping uptrend? This type of growth cannot continue indefinately, but the uptrend should continue, because the conditions that sent these stocks higher have only been exacerbated. The congress just spent 300 billion more on the GSE bailout. That money will be borrowed into existence, further crippling the dollar and driving up prices.
That is my view too. But the "greed" prefers the current rate of appreciation.
Well I just averaged down to dream price levels. 116 for MOS and 87 for AGU. I am not being suckered this time.
The charts of both OIL and USO have just hit their 100dma's. To us, this suggests that the commodity slide may be over for the time being. The drop from their highs to their moving averages was so fast, that at a minimum, a bounce is in order.
Does this bode well for Fertilizer stocks then Snot? I'm still holding to my MOS, but the buying volume has been light. Not an expert in TA though.
I assume you're going to hold through earnings for CF and MOS?
Thanks for the continued analysis. I may not post much, but I read your blog daily.
Time for an extra tall Guinness after that week!
Looking forward to Monday's action already :)
Cheers everyone!!
Thanks for reading our blog. The fact that OIL and USO have reached their 100dma's is very good for commodities in general because that was the next support level. Above it, they were just in freefall.
If (and that's still a big IF) this is a bottom in fertilizer stocks, we will look back on this time and wonder why we didn't pile in right here. It's so hard to do when it's happening, though.
On previous iterations, it was less stressful, though, because we know that this trade has been going on for a very long time and everyone knows about it. It will be reaching an end soon.
In the meantime, we are holding until earnings on Monday because we might as well at this point. We lightened up on SMN somewhat today, but will pile back into it if these stocks all break down together. It's easier for us to adjust our holdings by trading SMN because it's just one ticker and we can buy and sell it quickly. To sell all of our fert stocks (in various portfolios) would take awhile. So for now, SMN is how we are playing it.
We sure hope this isn't the last iteration in the channel. If we do get to new highs and the euphoria returns to this sector, we'll have to come back and re-read these posts so we can sell into the euphoria with conviction.
Snot. Pot had stellar e and guidance. Closed at 203. What do you think about the stock now ?
Does anyone see on the charts a head and shoulder inverse for MOS? I am no expert in charts and I read that the head around the 118 and maybe a climb in the next few days to 140 and a drop then it move up?
Your thoughts would be greatly appreciated...
Is an upside-down or inverse H&S a 'standard' pattern? I'm new to TA, so I don't know. I suppose I could see that playing out, given what I expect from oil & the general market in the coming 2 months.
I'm wondering about earnings releases here. Both MOS and CF report after the close tomorrow. Can anyone comment on after-close reports and if they're typically predictive (or not) of poor earnings or guidance? I'm wondering if there's some common knowledge out there I should know about. Snot I would love to hear your opinion.
Also, does anyone see a breakout in gold coming? GRS is at the bottom of it's channel now (Clarke's blog pointed me to it) and I'm tempted to buy some here.
Cheers
Hello
Interrested in gold. Where can i find Clark's blog please.
Thank you
Filip
MTL getting pulverized once again.
http://maybeitsclarke.blogspot.com/
Snot, do you use stops in your trading?
Anyone else?
MOS/CF: The suspense is killing me!!
I used a stop when I bought HON (honeywell) a couple weeks ago at 47.50. I kept moving the stop up as the price went up. (I set the stop to 3% under the high.) But apparently I moved it too far up because next thing i knew there was a momentary dip, and my stop kicked in and I sold at $48.80 shortly before it went to my target of $53. I wont be using stops again, unless I am going to be away from the computer...
MOS' report looks good, no? Why down so much AH?
Do you still expect a rally from here?
I have to say I am worried on this ag play. I bought some MON prior to reporting they had great numbers and the stock has gone down about 10%. I bought some POT prior to earnings again amazing earnings with zero bump in the stock price. I bought some CF prior to earnings. They have tripled their profit. After hours the stock is down. I don't know what more stock owners could want. When you look at all the industries tanking out there and the ferts are still raking it in it is hard to understand why people are down on them. Does it really get any better then these companies are reporting? Christ I wish my business was doing 1/10th as well. I don't know what to think. I feel we are swimming upstream on this and the slightest bad news will bring all ferts down. It is kinda scary. I'm lost on this. How are you guys feeling?
The reports were totally amazing. The percentage by which a company beats (suprises) each quarter usually slowly tapers until analysts have them pegged. With these stocks, there's no slowdown to the suprise.
Forget about premarket. Forget about tomorrow morning. All that matters is where we close tomorrow. If it's ugly, then we have to admit we were wrong, start getting out with as little damage as possible, and seek out the next trade.
But until the hedge funds have a bottom feeding frenzy on your fear, we're not going to admit defeat until we see tomorrow's close.
Granted, it doesn't look good considering the reaction to incredible earnings isn't even helping, but it's really too early to tell. If these stocks do great tomorrow (perhaps after a morning selloff), the headlines will read "Fertilizer Stocks Surge on Strong Earnings", as if no weakness was ever present.
As we've said before, if we lose this sector, all hope is lost for the market. With the financials starting to crash again, it really looks like that scenario is possible. If we lose fertilizer, we would not be suprised to see Dow 10,000 before this bear market is over.
While I agree that all hope would be lost for this market in the context of investing, it also means that the bubbles are finally subsiding and the excess money printed is not finding its way into other sectors. During the 90s, the liquidity was in tech and the money got chased out, stocks and commodities were at lows, but the housing soaked up money, now everything else is down and the commodities are soaking up money (since 2003). If commodities die here the only option left is deflation.
I don't think we are there yet. We have not seen the depths of the inflation spiral yet.
this slow & steady climb is starting to look good...
just piled into AGU with a 3% trailing stop loss.
GLTA!
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