Short Term Play: Shorting Potash Companies
August 5, 2008 – 11:24 pmI have seen a trend in potash agricultural companies, both trending in the lower direction. In the two graphs I have posted below, we can see definitive head and shoulder tops in both Potash of Saskatchewan (POT) and Monsanto (MON). A play you could do here with these two companies along with the rest of the sector is shorting. For those of you who do not know what shorting is, it is a option you can do when you think a stock price will decrease. Longing is the act of buying a stock with the intent to go up. Lets take a look at the graphs. I apologize for the primitive colors used for the charts but I do not have photoshop, so I had to use a paint type program:
Potash of Saskatchewan: In this graph, we see a head and shoulders top lining up with the resistance line at three troughs before the downside breakdown happened a week ago. If you pull up a one year graph of Potash, a resistance line was formed at about $125 from late 2007 to early 2008, meaning there is a possibility this stock could drop into the $125 range.
Monsanto: In this graph, there is a beautiful head and shoulders top that is formed which resistance troughs formed at $110 dollars. The downside breakdown happened about a week ago as well. Notice how uncanny the two graphs are. Again, looking at the nine month chart, we can see resistance forming at around the $90 mark in late 2007, January of 2008 and Mid-March of 2008. There stock could drop into that range before resistance begins again.
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-Justin Moon, Senior writer for Marketchasers.com