Shown Above are the charts of a few Ag (CF, MON, POT, Agu) stocks. These stocks have strong trendlines and have performing very well for us and other faithfuls thus far. But in this "iteration", these stocks have begun to show signs of tiredness.
There are MACD divergences all over their charts. Furthermore, in their previous iterations, these stocks went right up to the top of their channels before, coming back down. This time around, some of these are faltering. Of these MON, is probably the weakest and is sitting right on the bottom channel. Also, it has failed to make any significant new highs in its iteration. Probably the strongest of these stocks is AGU, though the stock is at the top of its channel.
We are not saying the Ag story is over. It is definitely on, we only believe the steepness of the growth cannot be maintained - a gentler slope uptrend is most likely.
On a side note, are these stocks signalling to us that there is a rate hike somewhere on the horizon of the next 6 months?
4 comments:
And wha about MOS?
MOS is in not a pure Ag play I think. It does share the characteristics of all the stocks I have mentioned. I expect, its behavior will be sometime in between.
MOS is as pure ag as you can get. They primarily make fertilizer. They just sold their Nitrogen business to Yara, a small part of their operation, so that they could focus on Potash.
Ag got hammered today, or should I say, fertilizer got hammered today, lest I get *urds thrown my way again as happened elsewhere, mostly due to the steep decline in oil. A report from GS available right now only by subscription and posted in the POT Yahoo message board has come to the defense of POT, though. We will see if it does any good tomorrow and see if any of the money that has been flowing into financials comes back to ferts, as the financils like MER post horrible numbers, and others like GOOG also may get hammered:
Goldman Sachs Global Investment Research
July 17, 2008
COMMENT
Potash Corp. (POT) {$222.93}
Estimates Not Under Review
POT capacity additions - no reason to panic. Buy the weakness
News
PotashCorp announced today that it will move forward expansion plans and will increase potash capacity by 2.7 million tonnes, or 15% by 2012. Not surprisingly, there was panic in the market as investors fear that capacity additions would lead to an oversupply market and, hence, lower prices. In our view, this reaction is off-base because investors appear to overlook: (1)
the history of supply management in the industry. As the leading global
potash producer, POT has proven to be very disciplined in the timing of capacity additions and will curtail production in the face of slowing demand as it has done previously. Therefore, unless there is a temporary shock to the market (as happened in 2006 with China), we don't believe potash prices are going to decline in the near future. (2) This announcement doesn't alter the supply/demand dynamics of potash dramatically as we expect global demand to continue growing at the rate of a world-scale facility (~2 million tonnes/year). The scarcity of the product that has been the key element in driving global prices higher has not disappeared. (3) This capacity doesn't come on line until 2012. We believe growing global demand for fertilizers will continue to absorb any capacities. (4) The last time POT announced the first wave of capacity additions on May 1, 2007, the stock was trading at about $60 per share. Global market fundamentals have only gotten stronger.
Ok, I stand corrected. Somehow I was into thinking MOS also does some Animal food/livestock/fishing stuff.
Ag is undergoing correction. I unloaded some SMN today and loaded up on AGU. I picked up some SMN the other day and unloaded it today. But the SMN chart still has a bullish look. I guess it can break above 35 and is gathering strength,
KOL(and components) getting hammered as expected. I won't be surprised it to hit 44 and SMN to 37-38 or so. I guess, these places are ideal for scaling back into commodities.
Good luck to all of you.
By the end of the year, as yet, I see no reason why the commodities should not scale new heights. AGU to 160$
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