Potash Is Busting out All over

As with gold 6 weeks ago, as with oil 2 days ago, now comes the liquidity chasing one of the few laggard areas... agriculture. Potash (POT) is breaking out in almost identical fashion to the other 2 commodities mentioned.

Last Thursday we saw a story that potash inventories declined for a 3rd consecutive month, although still at 142% above the 5 year average. However, by the time they get closer to average - these stocks most likely will have run a long way.

• Potash Corp of Saskatchewan (POT) said on Thursday North American potash inventories declined for a third consecutive month, but inventories at the manufacturer level continue to remain well above average.
• Potash inventories had risen steadily through the first-half of 2009, despite major production cuts, as farmers concerned by exorbitant pricing and hurt by the credit crunch had deferred fertilizer application.
• In July, India signed contracts to import the bulk of its annual potash requirements at $460 a tonne, well below last year's contract price of more than $600 and the spot market price of $700 at the time.
• The new Indian contract has brought some international buyers back into the market, but many buyers and distributors still remain on the sidelines and are waiting for Chinese importers to finalize their annual contract, as they believe that potash prices could fall further.
• In a set of graphical data posted to its website, Potash Corp also indicated that potash spot market pricing was almost flat at just under $500 per tonne in September.

With a bevy of bad news in this sector 6+ quarters, sellers may finally be exhausted. Or it simply could be the chase of the underperformers as Ben Bernanke's money looks for the next thing to inflate. Can't tell anymore how much of these moves have to do with actual fundamentals and how much is so much paper currency chasing a fixed amount of stock certificates. Let's keep an eye on what price the Chinese offer for potash; if its favorable, it might set the stage for the next bull run in fertilizer (still among our favorite long term themes). Earnings are Thursday and apparently no one has any fear going into the report since technicals are all that matter in this market.

For momentum based traders the

Potash (POT)

breakout is one they love to chase - let's see if

Mosaic (MOS)

joins its big brother. A move over $56 is what one would want to see here.

No position

Comments

[Macro_Man:]

Yup, momentum is a beautiful thing until it goes against in a hurry. But, it is awesome while it lasts. Enjoy the ride! Long DBC. Booked a little profit on USO yesterday and had been long POT, but got out one day too early..like Friday 3:55PM :)

Oct 20 08:58 AM

[Joseph L. S...:]

I envy those traders who can (or claim to be able to!) watch every sector and be able to leap aboard a train just as it is leaving the station for a wild Mr. Toad ride.

It just isn't me. So I plod along, doing basic research, tearing into annual reports, reviewing demographic trends, and gauging investor sentiment. I've been in agriculture for months now. So while my train still sits in the station, at least I have the luxury of buying at leisure rather than in a panic. As a result, my money has been "sitting" (and collecting some nice dividends) and, since our clients are comfortable with the concept of ag as a long-term play, we'll get in "too early" without stress and enjoy the ride from what we hope are the best seats.

So let me to the momentum of POT and MOS simply add: fundamentally (which counts to me) I believe they are well-managed, well-capitalized, and undervalued companies, as well!

Oct 20 09:41 AM

[TraderMark:]

been there many times!


On Oct 20 08:58 AM Macro_Man wrote:

> had been long POT, but got out
> one day too early..like Friday 3:55PM :)

Oct 20 11:09 AM

[TraderMark:]

Joseph that's fine and dandy; I've been in "ag" since 2006 but from summer 2008 to spring 2009 many of these stocks lost 70-80% of their value. Just don't want to sit around and 'weather' that - pardon the pun.


On Oct 20 09:41 AM Joseph L. Shaefer wrote:

> I envy those traders who can (or claim to be able to!) watch every
> sector and be able to leap aboard a train just as it is leaving the
> station for a wild Mr. Toad ride.
>
> It just isn't me. So I plod along, doing basic research, tearing
> into annual reports, reviewing demographic trends, and gauging investor
> sentiment. I've been in agriculture for months now. So while my
> train still sits in the station, at least I have the luxury of buying
> at leisure rather than in a panic. As a result, my money has been
> "sitting" (and collecting some nice dividends) and, since our clients
> are comfortable with the concept of ag as a long-term play, we'll
> get in "too early" without stress and enjoy the ride from what we
> hope are the best seats.
>
> So let me to the momentum of POT and MOS simply add: fundamentally
> (which counts to me) I believe they are well-managed, well-capitalized,
> and undervalued companies, as well!

Oct 20 11:10 AM

[Macro_Man:]

I used to be like you...until the bear market started and I started reading about technical trading.

In a bull market, fundamentals are most important. In a bear market, technicals are critical. So, I would recommend reading about technical trading. It will at a minimum reduce any potential losses


On Oct 20 09:41 AM Joseph L. Shaefer wrote:

> I envy those traders who can (or claim to be able to!) watch every
> sector and be able to leap aboard a train just as it is leaving the
> station for a wild Mr. Toad ride.
>
> It just isn't me. So I plod along, doing basic research, tearing
> into annual reports, reviewing demographic trends, and gauging investor
> sentiment. I've been in agriculture for months now. So while my train
> still sits in the station, at least I have the luxury of buying at
> leisure rather than in a panic. As a result, my money has been "sitting"
> (and collecting some nice dividends) and, since our clients are comfortable
> with the concept of ag as a long-term play, we'll get in "too early"
> without stress and enjoy the ride from what we hope are the best
> seats.
>
> So let me to the momentum of POT and MOS simply add: fundamentally
> (which counts to me) I believe they are well-managed, well-capitalized,
> and undervalued companies, as well!

Oct 20 11:23 AM