I’m a big believer that technicals mean more than ever in today’s choppy market and in a new series of articles, I’ll be looking at several of my favorite stocks across multiple time frames starting with CF Industries (CF), a fertilizer producer I recommended in a previous article,
On the weekly chart, we see that the medium-term uptrend was broken the last week of September as the stock moved down through the $135 area and is currently trading underneath its 15 and 40 week moving averages. Even with the first week of October bounce, the last bar on the MACD histogram made a new low meaning momentum remains to the downside. The dotted yellow line represents a potential level of support at the 2010 highs around $110.
On the daily chart, we see the stock trading underneath the 20, 50 and 200 moving averages. In fact it was turned around right at resistance in the form of the 200-day moving average and the underside of the medium-term trendline. There’s high volume into lows around $135 on August 8 and again on September 30 but volume contracts on up days. This is characteristic of a stock that wants to trade lower.
CF is likely to continue lower in the short to medium term. Fundamentally this makes sense given agriculture stocks’ sensitivity to a rising US dollar. I’m looking to establish a new position around $110 in anticipation of further stimulus in the States which will put a floor under commodity prices.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.