Real Money March 4, 2008
Here are the charts that will be in my RealMoney article for Tuesday, March 4th: SPY, MON, MOS, AGU, COIN and DAR
I’ve been getting a lot of requests for my take on the S&P 500, so I thought I’d check out the SPY. Once again, we see a failed test of the 50-day moving average after churning sideways for almost a month. The SPY is now down at support, and I’d be a seller if it falls below $132.50 (which I expect it to do). However, bear in mind that the longer the SPY trades sideways, the lower the 50-day moving average falls. Eventually this will produce an upside breakout. But that’s for later — for now, just worry about support, which is tenuous at best.
Now, I’ve also had lots of questions about the agri-chemical complex, so here is my take on several of the more prominent ones (and I’m covering Potash (POT) in today’s “3 Stocks I Saw on TV” video).
I’ve been hearing a lot of chatter about some railroad track formation that William O’Neil has spotted in Monsanto (MON). Well, I’ve had numerous readers try to explain it to me, but unless I see a picture with some circles, arrows and text on it that really makes those tracks stand out, I’ll just continue to use my own method. I wish Bill all the best and hope he stays workin’ on the railroad all the live long day. Me? I’m just trying to make some dough.
I see a big washout in mid-January that took the stock down below the 50-day moving average on very heavy volume. The subsequent breach of the 50-day moving average in early February was on lighter volume, but was similarly rejected by the bulls. Now, the stock continues to run along the 50-day moving average, and advanced more than 2.50% just yesterday, in a very sluggish market. While there is a lot of resistance to chew through around $120 – $125, a trend is a trend until…it isn’t a trend. So far, it’s a trend and I expect that trend to continue…until it doesn’t! But something to note is the heavy put buying on the XLB, which Pete Najarian discussed last night on the Fast Money Web Extra. Monsanto is a major component of the XLB, and the put buyers have been right in the past — so honor those stops!
MOS has been a Jim Cramer favorite for quite a while, and you can tell by the powerful uptrend that Jim has been right. This latest consolidation between $110 and $120 is about to resolve itself. A breakdown below $110 really clears the way for a pullback to the 50-day moving average, which a breakout above the downsloping resistance line sets the stage for new highs. While I have a bullish bias on this (uptrends have that effect on me), I wouldn’t recommend anticipating the breakout. Instead, let the stock do the work, then enjoy the ride.
AGU has run about 50% since the January low, but sure looks like it’s failing at the December high. That sets the stage for a double top. Since I remain bullish on the agri-chem industry, I’d avoid shorting this stock even though it appears to be pulling back. Instead, I’d wait either for a pullback to the 50-day moving average, or for a breakout above $76. Then I’d buy.
A while back COIN got a positive mention in Dennis Gartman’s newsletter and the stock took off. Now it’s breaking out of another consolidation on heavy volume. When a company’s stock has run from $4 to $14 in a couple of months, the business plan had better include the discovery of a cure for gravity, because it’s really tough to buy after that kind of move. Still, if you’ve got some speculative money, this is a bona fide buy signal. I’d just put a stop back below $13 because when this rally ends, it will probably end badly.
Darling (DAR) has nothing to do with agri-chemicals…but what the heck! I said I take reader requests, and I’m happy to oblige. Yesterday’s high volume pullback followed by a fairly strong close could be yet another washout that allows for higher prices. But there are several analysts’ price targets nearby, at around $17. Now, that’s $3.50 from current levels, but that’s sure not enough headroom to get my attention. I’d take profits on this and look elsewhere.
Be careful out there.
Real Money