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Tickers in this Article: POT, CF, MOS, tAGU
Because the stock market is comprised of millions of people making choices, it often follows a similar theme across all the different market instruments. As traders, it often pays to be aware of what thesis the current market is taking as an assumption. For example, the ailing consumer was a theme that was prevalent during the recent bear market decline and of course there have been several periods directly tied to moves in our currency. Recently, it seems the focus is turning back towards inflation being inevitable with current fiscal policy being what it is. As such, investors have been flocking to stocks highly correlated with inflation.

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One such group is the agriculture sector. This group got hit hard during the bear market, but has been steadily recouping its losses. As a whole, the group has been consolidating for the past few months after rising for much of 2010. With all the recent talk of inflation, its possible that this group could catch a bid and resume its push higher. (For related reading, see 5 Agriculture Stocks To Grow With)

Potash Corporation of Saskatchewan (NYSE:POT) may be the highest profile agriculture stock and it has been in a very tight consolidation for several months. POT had a huge gap in August following a bid for the company. POT has held the majority of this gap as it drifts sideways. It is now pressing up against a trendline marking the top of its current channel and could cause a short squeeze if it cleared $150.




CF Industries Holdings, Inc. (NYSE:CF) is another agriculture stock that could benefit from increased focus on inflationary stocks. CF has been consolidating after a strong rally off its 2010 lows under $60. It didn't give much back during its recent consolidation revealing relative strength versus the markets. CF has already cleared an important resistance level near $130 and could be headed higher. (For more, see Looking Back On M&A in 2010)




Another stock to watch in this sector is Agrium Inc. (NYSE:AGU). AGU also had a nice rally from its 2010 low, and has been following a similar consolidation. AGU is attempting to clear a trendline marking the tops of its most recent rally attempts. While this is an important level, traders should remain focused on its recent high near $90. A move above this level would likely lead to a breakout.




Mosaic Company (NYSE:MOS) is another widely followed stock in this group. MOS is also clearing a trendline marking the top of its current consolidation pattern. $65 has held as support on several occasion and appears to be a solid floor for MOS. The $75 level marks its October high and is the level to watch above.




Bottom Line
Traders should always stay up to date on current news or market sentiment regardless of their trading style. Often, a market theme will linger for months as market participants attempt to price in a macro event. The traders who can accurately position themselves ahead of these catalysts will often be rewarded handsomely. With market participants beginning to worry about inflation again, stocks that benefit from an inflationary environment will likely prosper. The agriculture stocks are one of these groups and bear watching moving forward. (For more, see 2010: A Look Back At Agriculture) Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Charts courtesy of stockcharts.com

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

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