Potash Is Not Growing Green Shoots

The fertilizer names have been much weaker than the commodity space as a whole... Thursday, they were green in a sea of red on a Russian price increase, but really Potash (POT) just warned of yet another production cut just 2 weeks ago. [Jun 17, 2009: Potash with Another Production Cut Hammering Fertilizer Names] We have short attention spans.

I see a low-risk short opportunity, and I want to begin expanding my short exposure with some of my cash. I still find "reflation" to be a tired, crowded trade and I think technology has a great chance to join it soon. But all in good time. I have almost no individual short exposure right now, so I am going to slowly build some as the "right shoulder" looks to be forming (slowly) in the head and shoulders pattern we discussed earlier this week.

Usually I'd take heed of a green stock in such a bad tape, but this is news drive and the news can be forgotten by next week. If I'm wrong, I'm wrong.

For now I am going to sell out of both Potash (POT), and Mosaic (MOS) - together they are only 1% of the portfolio, and begin shorting Potash with a 3.5% stake. This chart from stockcharts does not agree with some other sources, but I am showing it to you for reference. What I am looking at shows the 200 day at $96, and the 50 day moving average at $98, so 2 layers of insurance. I am going to short here in the mid $95s and I'll stop out over $101 if and when.


Speaking of agriculture - what a horror show over at Monsanto (MON) since last earnings - these names are among the top hedge funds' favorites the past few years, so the action is striking.

Disclosure: Short Potash in fund and personal account

Comments

[huntergirl:]

I think you will be wrong on this trade.

Jul 03 06:13 AM

[WACG:]

You are going to get deservedly burned on your short trade - not that I care. For some reason you have the hubris to think that YOU can time the market(s) and even in POT. "Technical" analysis of stock prices is especially stupid in stock prices that are tied to weather, inelastic goods, and near monopolies ... but have fun. BTW, those that have any skill (and therefore success) in trading have NO NEED to yap about what they are doing.

Jul 03 08:49 AM

[Pax Americana:]

Mark, following with great interest your work," hope" this short becomes lucrative for yourself....A Friend

Jul 03 09:02 AM

[manuel:]

the russians increased the price for domestic demand, that price was less than 200 $, so I don´t think this is big news

Jul 03 11:50 AM

[Mentor:]

I am folowing you on your alaysis about potash and fertilizers globaly. But this time, it seems to me that you are tired watching fertilizers market. in short term don't expect a miracle in fertilizers. K+S has decresed potash prices by 22%, while new indian fertilizers minister has started his 100 days plan actions and countinuing talks with BPC and ICL, while canpotex declared a deal with japan with a price over $700 cfr, without mentioning exact price. Phosphatic fertilizers have started to recevoer in prices and volumes, even if phosphate and nitrogen have plummeted, but don't we say "starting from zero you got nothing to lose'' So I am confident in phosphatic fertlizers in medium and long term.

Jul 03 12:52 PM

[TA:]

I like your stuff Mark but your shorting bias(your tagline - I don't believe in greenshoots) has self-admitably hurt your trading performance during this rally.

There's some good evidence of a pullback and general market rollover and POT is no exception but I've seen too many bears get their faces ripped off on good setups lately. The longer term trend is up until it's not.

I hope you are not wrong in this trade.

Jul 03 02:11 PM

[Jake2:]

He had a good stock but he lost it. Sound off: One, two. Your left, your left. Your left, right, left.

Jul 03 02:36 PM

[manuel:]

the news you are refering to is not particularly relevant, it referes to the domestic russian market, and the fact that they rose the domestic price from 180 $ to something more is not relevant for the price of potash in general, so I do not know why the others made gains......

Jul 03 05:54 PM

[Jasper M:]

But, but . . . POT just Can't go Down . . . can it!?
I mean, CETIN says it's good . . .

Jul 03 10:46 PM

[TraderMark:]

Vehement love for Potash; I like it too - long term. This was a technical call with an explained "stop loss" out if things go against me. Nothing more.

Jul 04 08:27 PM

[manuel:]

some say potash is a crowded market, can anyone explain me the concept?

Jul 05 03:07 PM

[manuel:]

crowded trade sorry

Jul 05 03:51 PM

[TraderMark:]

Closed the short I put on Jul 2nd here for a nice profit in $88s
(from mid $95s)

www.fundmymutualfund.c...

Jul 08 03:22 PM

[naidle:]

You'd be making a killing today :)

Jul 10 01:45 PM

[TraderMark:]

I did ok. Moved my short over to LVS and made 8% since yesterday at 3:45 PM

Got my skin here

Just reading the comments in the stream above I have a chuckle. Notice no one came back to say "sorry, bad call on my part being so critical" :) part and parcel.


On Jul 10 01:45 PM naidle wrote:

> You'd be making a killing today :)

Jul 10 04:04 PM

[Andipandi:]

I enjoy your posts in general and I enjoyed this one in particular. Please continue to "yap about" what you are doing. Good trading!

Jul 11 06:56 AM