Friday, June 20, 2008

Don't Overpay for POT

Ag related stocks are finally starting to pullback. Those of us who missed the recent run (I raise my hand in shame) are starting to get itchy trigger fingers. Rest assured, I've got my gun set on safety.

Take a look at Potash. Even with the 10 point pullback from all time highs, the stock is 15 points above the 50 day moving average and barely starting to work off overbought stochastics. With the runnup the stock has had, I would expect a more meaningful pullback to some real strong, well defined support areas.

I will buy if the following conditions are met:

1. The stock pulls back to the support zone I've drawn below, in the $220 range.

2. Downside volume stays below the line I've drawn within the volume bars. The idea is that downside volume should be less than previous upside volume. If volume increases on the pullback, that is a sign of distibution.

3. Stochastics near oversold levels, in the 20-40 range.

1 comment:

j. (marketfolly) said...

yup, right on. posted very similar thoughts on my blog a few days back for POT and MOS. this sector is almost becoming predictable haha. hopefully it doesn't decide to start surprising us.