Agrium Inc. in a period of seasonal strength

Jul 30th, 2010 – Comment

The shares of AGU are doing what you would like them to do an over the next six months you will have the opportunity to make a profit. From here it looks like a run to $75.00 before you hit resistance.


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agrium

 

Good day Lou

Enjoy your insights. What are your thoughts on potash, specifically Agrium, in the near future (6 months)?

Many Thanks,

John

 

Hi John,

Your question is well timed given that fertilizer stocks enjoy a period of seasonal strength from August to December. It does appear that the party got started a bit early this year for Agrium Inc. ( AGU TSX). Lets have a look at the charts.

 

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The three year chart illustrates the characteristics of trend, support and resistance. The first is the support at $52 which you can trace back to late 2007. When the price of AGU broke its uptrend in March of 2010 when it met resistance at $75.00, the decline halted once it reached a level where investors had confidence that buyers would emerge. That is what makes the understanding of , trend, support and resistance so important when we look at a chart.

As Jordan Kotick, Head of Technical Strategy at Barclays in New York, taught me many years ago if you can use a ruler you can reduce risk and improve opportunities. So get a straight edge and get in the game!

 

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The six month chart tells the tale of the MACD generating a sell signal when AGU met resistance at $74.00 in March and a buy signal in late June when it hit $52.00. As mentioned earlier it looks like AGU has gotten an early start on its period of seasonal strenght but that doesnt mean that the opportunity is lost.

In fact it strongly suggest that if you are looking to catch a ride you need to know when the plane, train, or bus is scheduled to leave and get to the terminal early in case of a change. As with all factors in the market there are no guarantees that a pattern of seasonal strength will occur.

As I discussed with Brooke Thackray, author of ” Thackray’s 2010 Investors Guide”, and an expert on seasonality, its like quantum theory. When we look at electrons circling the nucleus of an atom we are not sure where the electron is exactly just the probability of where it could be.

The shares of AGU are doing what you would like them to do an over the next six months you will have the opportunity to make a profit. From here it looks like a run to $75.00 before you hit resistance.

Happy Capitalism!

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