The Canadian Technician

Fertilizer Related Stocks Start Showing Green Shoots


Agriculture stocks have been on a slow burn for shareholders. Continually drifting lower, frustrating even the most patient investors, it's been a difficult few years. Perhaps there is a light at the end of the field, or is it just another firefly?

Let me start with our Canadian Agriculture plays and work into the US market.

Agrium on the $TSX, AGU.TO (also on NYSE at AGU). The SCTR is sun-rising above 30 from an oversold level. The Full Stochastics have turned up like weeds in summer. The MACD has also flipped onto a buy signal. That is the optimistic side. The Relative Strength is still very, very weak. The volume is meagre and the the price is below the long term 40 WMA. Some signs of a sunrise, but we are not in the heat of the day yet.

Next is Potash Corp. (POT.TO, POT). The big downturn in Commodities has pulled this Saskatchewan miner into a 6-year frump along with his wheat farming friends. With the merger between Agrium and Potash Corp. still working its way through the governments at home and abroad, this chart has some of that in it as well. Whether Alberta loses a head office or Saskatchewan loses a head office is about to be decided. During this fall's harvest, the two companies will become Nutrein. Selling the ticker symbols POT.TO and POT on the NYSE to the marijuana growing community might be a sprout to the balance sheet!

The chart has a little momentum in it. The SCTR is rising out of a five-month drought. The full stochastic has a nice positive divergence on the last low. The MACD gave us a buy signal this week with a much higher low. Relative Strength to the $SPX is still very low and the stock has not moved above the 40 week average.  Bottom line, this stock is growing but needs another dose of fertilizer to get above resistance.

CF Industries (CF) had a nice break this week as well.  The stock grew to 6-month highs after making lower lows last week and this week.  With the lower low this week, and the higher high, that makes a bullish outside week as it closed near the highs. The SCTR moved above 50 which is excellent from a low level of 15 in July. The considerably higher low on the MACD suggests momentum is improving and the MACD is already in positive territory. This chart looks very good.

Mosaic (MOS) looks terrible. Definitely not the visual appeal of a Park Guell mosaic. This week was a big down week, taking out the prior week's low easily. The rising SCTR pulled back again. While none of these charts have had nice relative strength trends, this one is trying to make lower lows. Horizontal support on the price at $22 keeps being tested, so this price action looks fragile. The MACD just made a lower low in momentum than the October 2016 low, so the technical news train for this stock is all negative.

Lastly, Intrepid Potash (IPI) turned in some astonishing high prices this week with a sudden surge of 29%. One would assume it was some sort of merger news, but no, the company just lost less money this quarter.  Makes you wonder about the fickle stock market when the company loses money and the stock rocks! 

The Relative Strength is at one year highs, price shot out of the flowering stage to a kernel of wealth making 2-year highs, and the Full Stochastics are in full sunshine mode with a series of rising lows and back above 80.

Intrepid (IPI) is obvioulsy the nicest chart on the page, but there does seem to be a trickle of improvement showing across most of the charts. Never sure how much I love the Biggest Loser game that IPI is in.  

I like this group except Mosaic. That chart is a hot mess and looks more like mould in an investors portfolio. Maybe it dries out here and starts to bounce, but it doesn't look good in my books.

The merger between Potash and Agrium to Nutrein Corp. is big news in the farming business. It definitely builds a lot more vertical integration into Agrium's business unit. Agrium has been acquiring companies for a long time, so they are aware of the issues joining two organizations together. How well a miner fits into a direct to farmer retail business is yet to be seen. 

If the price of grain starts to improve, these stocks just might go into the blossom stage. Here's hoping for a little fertilizer with those blooms.

Good trading,
Greg Schnell, CMT, MFTA.

Greg Schnell
About the author: , CMT, is a Senior Technical Analyst at specializing in intermarket and commodities analysis. He is also the co-author of Stock Charts For Dummies (Wiley, 2018). Based in Calgary, Greg is a board member of the Canadian Society of Technical Analysts (CSTA) and the chairman of the CSTA Calgary chapter. He is an active member of both the CMT Association and the International Federation of Technical Analysts (IFTA). Learn More
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