Filed Under:
Tickers in this Article: POT, AGU, MOS, TRA
The agriculture chemicals/fertilizer sector was one group that was hit especially hard during the ruthless market decline in the second half of 2008. Many stocks in this group had declines in excess of 75% from their market peaks last summer to just a few months later in the autumn. If ever there was a case of panic selling, this group fit the mold. The group never saw a return to its price lows from late 2008, even as the general markets set new lows in the spring of 2009. As a whole, the group has been in a very large and lengthy consolidation from that spike lower, and the big question is whether this consolidation is a bottoming process, or a pause in a longer term decline.

IN PICTURES: 7 Tools Of The Trade

Often, it is beneficial even for short-term traders to step back and look at a weekly chart. Oftentimes, a weekly chart will clear up the noise of day-to-day movements and provide a concise view of a few years' worth of price action. Support and resistance levels that form over several months tend to act more strongly on a stock. Often, scaling back to view the big picture helps keep a trader focused on the larger trend. (For more, see 9 Tricks Of The Successful Trader.)

In looking at the weekly chart for Potash Corp. Saskatchewan (NYSE:POT), the severe decline in 2008 is clearly apparent. The final tally from top to bottom was a drop of almost 200 points from the stock's all-time high of 241.62. Despite the severity of the drop, POT appears to have stabilized and has been trading sideways for several months. It is also beginning to set higher lows and higher highs. POT has basically been following an established channel, and respecting the 200-week moving average as support. An important level to watch is the recent low near $83.

Source: StockCharts.com

Agrium Inc. (NYSE:AGU) is another stock in this group that was destroyed in the market drop of 2008. However, much like POT, AGU was able to stabilize and has been steadily building a base for several months. While looking at a daily price chart reveals a chart of a stock in an uptrend, when you step back and look at the big picture you can see that AGU is still well off its prior highs. However, the price action has been decent, with AGU setting higher highs and higher lows.

Source: StockCharts.com

Mosaic Company (NYSE:MOS) is another agricultural chemical stock that has also been trading sideways for several months after the steep decline. MOS is currently flirting with holding the 200-week moving average, and is right on a rising trend line that has been holding as support. The weekly trading range has been narrowing, and MOS could be getting close to a trending move. The key levels to watch in this stock are the recent lows near $45 and resistance from $46 up through the April high at $57.69.

Source: StockCharts.com

Terra Industries (NYSE:TRA) is another stock in this group to keep an eye on. While TRA also fell apart in 2008, it has recovered a larger portion of the decline than the others. Another aspect that sets TRA apart is that it cleared a base on the weekly chart in July, and has been consolidating above the base for several weeks. The $37.25 level is a key area to watch on the upside, with the $31 level acting as a floor.

Source: StockCharts.com

Bottom Line

Looking at the weekly chart keeps the recent action in these stocks in perspective. In the grand scheme of things, this group has been attempting to recover from huge price declines and has stabilized on the weekly charts. More recently, these stocks held support, are attempting to move back higher and could be close to a large move in either direction. While the noise on the daily charts is often difficult to decipher, stepping back and looking at the weekly charts is providing a clear view of the important levels to watch. Often, this is enough to keep us pointed in the right direction. (For further reading, check out Multiple Time Frames Can Multiply Returns.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

comments powered by Disqus
Trading Center