Click chart to enlargeOf CF, POT, MOS, MON and AGU, only CF has broken through its resistance line. The others look like the chart of POT above. The indecision plaguing the fertilizer stocks will come to an end very soon. Considering their resistance lines are quickly converging on their support lines (typical triangle or wedge pattern), either support or resistance must be broken soon.
Our guess is that the break will be dramatic, and very noticable on the charts. MOS has already broken support, although without the conviction of the others, it has not been able to drop sharply. MON is on the verge of breaking support, but has also managed to keep its head above water. On the other hand, CF has broken resistance and TRA just made new highs, so both the bulls and the bears can make a case for the direction of the next fertilizer move.
We aren't willing to guess, we're happy just letting the market tell us where they're going. In the meantime, we're going to juice up our stake in SMN and hold tight. If we ever get this rally, all this time in the waiting room will pay off. You only need 2 or 3 good trades a year to make close to a 50% return. With potential rewards that generous, waiting a month or two for a trade to mature is no reason to complain.
There's no telling exactly when the fertilizer move (up or down) will happen, but the converging lines on these charts suggest that a decisive move will occur by the third week of August.
39 comments:
uh oh... time for damage control?
too scary for me, at this point... I'm all out. Will buy back in after a huge drop, if we get one. UGH!
whew, when it rains it pours. I'm sure glad i got out at 128. Talk about a bloodbath. I am calculating a short term bottom at 106 for MOS. It happens to be at the 200dma, but that was not the rationale i used to calculate that bottom. It's just a coincidence. But that means 106 should be a very strong, tradeable support.
Worst day for me in the market ever. I have Fert, Natural Gas, Metals so....I have double digit losses across the board. Damn. Well I do not believe natural gas will stay down for that long, I will hold those. I have some tortures RIO stock which reports on Wednesday. At this point I might as well hold for that. I sold my CF today while I still had profit. I Have some POT and MON I am down about 10% Some SMN is offsetting but not enough. Now I don't know whether we are going to get a bounce in this fert? Looks like it might just do the same as RIO which ended up being the "slope of no hope" live and learn. I think I am going to hold till tomorrow morning. If no bounce on POT or MON I will just eat it. RIO has taken all my "average down" money. Sucks
Commodities stock tracks with Oil and dollars.
Yall didnt know that or Snot didnt mention it? YET?
There's your decisive break! Not in the direction we had hoped for, but we backed up the truck on SMN this morning so not all is lost. We're officially in damage control mode on a trade gone bad. We sold most of the ferts today except for CF. We still have a profit on that one and are going to hold onto it until the inevitable bounce. As for the others, if levels get ridiculously low (perhaps tomorrow morning), we'll reload and try to get ourselves to break even on this trade.
What's amazing is that even though OIL broke its 100dma today, it didn't drop much. Fertilizer is taking a disproportionately large hit today because it broke major support levels across the board (except for CF).
We're going to start looking for the next trade, but until then, buying SMN on any fertilizer rallies seems like a pretty solid bet. It's unlikely that the fertilizer stocks rally to new highs at this point. Not without months of sideways consolidation, if ever. Today was a decisive turning point in these charts, and even if we rally the next day or two, the fertilizer trade is dead for now.
The signs were everywhere leading up to this, but we chose to wait until D-day to throw in the towel. Today was D-day.
He means DUMP and run for cover guys.
Snot, please tell us how exactly in detail step you plan to do the damage control.
Thanks.
Snot's damage control plan was summarized here:
http://snotwheel.blogspot.com/2008/07/wheres-bottom.html
Cheers
Snot, if you have the time would you post your charts of CF, POT, MOS & AGU? Thanks.
Here is what somebody posted on the MOS board. If this is so, when this fund finishes dumping, what kind of bounce can be expected? GW
Earlier today 1:00 on TDAmeritrades Market page a story appeared which in part said: "There is some speculation that a large fund has been forced to liquidate its commodity position". Although not identifying the fund CNBC repeated the rumor.
Makes sense as all commodities are down from minerals to agchem and foodstuffs.
Oil is down what, 3 or 4%? Yet energy stocks for the most part are down much more.
Copper is down "only" about 4% but FCX is down over 10%. POT - the company is down 10%, but potash - the mineral isn't down as the price is negotiated far in advance between governments and the company's that supply it.
Gotta believe that a huge troubled hedge fund unwinding it's commodity positions is to blame for this mess.
Whatever the reason, we still broke key supports all around today. Our guess is that these stocks start acting like broken down stocks rather than uptrending stocks for the forseeable future. If they ever get their legs back, it'll be months from now. People are going to sell all rallies trying to do their own form of damage control. The tide has shifted for these stocks. If they had no earnings, the next stop would be $0, like the CROX's of the world. They have the perfect technical setup now to head straight to $0. It won't happen because of their incredible earnings and relatively low valuations, but after today's breakdown, they will remain under pressure for a very long time.
We made charts of MOS, POT, CF, AGU and MON to post here, but blogger is having trouble uploading images. If it doesn't work later tonight, we'll post individual links to them instead.
If you look back to when POT was last at 180, you can see that it needs to rise 10-12% for it to match what oil was back at that time. Either oil is going down $10 or POT is going up 15.
I am curious, why buy SMN as a hedge when DUG seems like a more logical hedge?
By the way, AGA is up 50% in a month.
I'd heard it on Bloomberg but no mention anywhere else that a Potash supplier in Russia is keeping prices fixed. Not sure if it had such a strain on all the Ags.
From TD Ameritrade:
US MORNING BRIEFING: Analyst Ratings Changes
Last update: 8/5/2008 6:32:15 AM
COMMODITIES: Crude oil futures could extend their current fall as funds continue to shed positions in commodities, says Olivier Jakob of Petromatrix. "Liquidation of positions are rarely done over only one day, hence the risk remains for the pattern to continue," he says, adding that intraday crude charts and across-the-board weakness in commodities will spark more talk about hedge funds closing positions voluntarily or being forced to do so.
UYG is at its 50dma. It is highly likely that it will bounce downward. If you believe that financials are in a bear market sucker's rally, then now is the time to buy SKF!
"The Commodity Futures Trading Commission has changed the reporting classification of one massive participant in the market for NYMEX crude oil futures from "commercial" to "non-commercial" after reviewing its trading activity and concluding that "commercial hedging or risk management activities did not constitute a significant part of the overall trading activity."
This single insititution had huge long-short spread positions amounting to around 327 million bbl of crude oil, and amounted to around 20% of the entire futures and options positions previously attributed to producer and consumer "hedgers". There are not many institutions in the world capable of running positions on this scale. The spread risk is enormous.
Moreover, the CFTC concluded that this position has been essential non-commercial (ie non-hedging) since at least the start of Jul 2007 because it has retroactively changed the reporting of positions all the way back to Jul 2007.
The revisions are not confined to crude oil and apply to other NYMEX energy contracts. There has been a similar but much smaller revision to the reporting of natural gas positions. It again affects a single institution (probably the same one) with a mixture of spreading positions but with a more pronounced short bias in the case of natural gas."
How about shorting some of these directly (MOS is what I'm considering) as a form of damage control here? Any large bounce in MOS and I think I might.
Any of you out there shorting these directly now?
Seems like the new trend is down. Why not try to recoup some losses that way, rather than fighting upstream?
Cheers
If you were going short anything, it should have been CF. CF had been flying out there in la la land like Wile E Coyote going off a cliff, while the other ag stocks had already taken a beating. MOS is now sitting on a fairly strong support. CF still has another 8% or so to drop before it reaches its 200dma
Snot. Where are the restistance levels you r eying on POT ?
Once stocks break down, more often than not, they're over. None of the fundamental excuses matter. Smart money has moved elsewhere, and they're unlikely to return unless new, positive and unpredicted events take place to bring them back. Anything could happen, but we wouldn't count on the ferts ever being leaders again. More likely you'll learn in a few months why they were being sold off over the past few days. Perhaps lower demand for fertilizer... we can only guess. All we know is that the gig is up. Time to move on.
I sold yesterday...it may go up now.
Are you looking at any other sectors now?
MiMi : CSCO did very well.
I can't imagine tech not being a leader soon again. I own WB, BAC as well (at lower prices)CELG. Biotech is very good in general.
I'm getting signals that the bear market rally for financials is coming to an end. If true, this could have big implications for oil and fertilizers. I'm going to call a bottom for USO if it can close above $99 in the next 3 sessions.
USO won't be closing above $99 today, that's for sure.
USO, OIH, and all AG stocks, the run is over. Right now the trend is point to one direction "DOWN". Can't go agaist the TREND. It will KILL u.
short 200 MOS at 106.60. Since it broke the 200dma, I'm gambling this falls off a cliff.
CF has more room to fall, to the 200dma I know, but MOS has been so weak recently I figured I'd take this chance. Stop loss set at $108, and I'm done for the day.
Anyone else shorting these?
Cheers
I bought some AGA thinly traded but has been doing well. I am new to trading and I have to say it has really been an eye opener as to the way markets work. When I first started I though fundamentals and whether a company was profitable was important. Apparently not. Selling AG is just beyond me. As I have said before I am stuck holding RIO I was waiting for earnings. Did it matter... no. The earnings were great. Christ, if that company went out of business world growth would just halt....Shares were at $53 now it is $25 and no one wants it. Go figure. The hell with it. I am going to hang on to my shares and buy more when it hits $15 :o)
The other thing that amazes me is how fast people think things are changing. You know today were in a recession the world is coming to an end. Tomorrow it is blue skys and endless growth. What the hell are people talking about? This is a world economy we are talking about unless people are lobbing nuclear bombs at each other it is a slow grind. You know how long it takes an aircraft carrier to stop or turn once momentum is in place? Well what about the world? Unbelievable....SNOT where we going next???????????
This market is trader market my friend. following the TREND and you will make $$$. Earning,fundamentals of the company will not matter for this market. Buy and hold is the thing in the past when INTEL and MICROSOFT just invented. AG stock will have the same name AS JAVA stock. CHART will tell you what to do when you want to get out and keep your profit... Take a loss if you can or you will lose more. DO NOT AVERAGE DOWN in this market. GOOD LUCK TRADING...
I've been averaging down with SKF every chance I get and making a killing doing it. I unloaded some yesterday at 125, reloaded today at 116 and 114. Rinse, repeat. Same with FXP... whenever FXI hits its 50dma, time to buy FXP!
I am taking the phrase written above:"You know today were in a recession the world is coming to an end. Tomorrow it is blue skys and endless growth. What the hell are people talking about?"
We do live amazing times in the stock market...all those 200s 300s up and down and up, day after day shows what is behind the scenes.
I buy yesterfday 200 contracts POT puts and 200 contract AGU puts and Today was my day.I am out but Monday will be another day to play down with ag.
Where's Snot???
There is nothing to say he told you to get out of fert stocks. Now we all have to wait and search for new sector to invest in. Right now the market is in limbo. Is it going to break above 11800 and head to 12300 or will it hit the resistance line and get pushed down to new lows.
I personally think this is the last rally before market heads lower.
At least he can say if he's on vacation or watching the Olympics. SNOT! Where are you? Don't bail like you did on Yahoo - except that was a rude environment.
What, are you Snot's mother ak? He doesn't have to tell you or anyone anything. He was kind enough to do this blog in the first place and we should all be thankful for that.
Trader mike is right: what everyone who visits this blog SHOULD be doing is trying to figure out where the fert money is going right now. Somewhere out there are the replacements for the 'four horsemen of fertilizer' so let's put our energies into figuring out what and where they are and I'm sure Snot will return.
I am thankful to Snot for posting his thoughts on the blog. I have learned a lot from him/her. I especially appreciate his attitude of admitting being wrong.
Snot has been active on LDK board. Just coincidentally, LDK reported blow-out earnings last night and the stock is up 20% in afterhours. JASO and CSIQ will report today and tomorrow. Maybe the fertilizer/coal/oil money is going to solar?
Just some ideas to bounce around. I actually sold my LDK in afterhours. Plan to buy back later if it gets to 37ish. Sorry for not being dedicated long if there are other LDK fans here.
Lightsource
Yes it appears the money is going elsewhere. The thing that I find troubling is that if you listen to the talking heads out there, they claim people are pulling out of commodities because of a spreading global slowdown in growth. Basic demand destruction. So energy is falling, metals and all these raw materials. Ok I understand that concept, however if that is really the case and we have worldwide slowing growth. Then in my mind it follows the entire market is going to tank huge. You know if everything is slowing down why would you think buying tech would be any better? The demand for everything should be less including iphones and the like. So what would people buy ..health care? maybe invest in dollar stores? perhaps. Overall though that is not going to be enough to hold the market up if world consumption raelly is slowing. Seems like buying ETFS that short certain indexes or the market in general would be the best bet. If I could get past the moral implications I might also buy anything that supports war and destruction. That seems to be a never ending source of profit. The more desperate people get the more likely we will need to get rid of some of them. I just can't buy those stocks but I bet there will be money in them in troubled times. Just a thought.
And sometimes there is money in money.
Basicly what i am saying you will be better off holding cash or investing in T-bills if the whole market goes down. When whole market goes down at that point its about preserving capital versus making profit.
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