Migao Corporation is the short stack at the fertilizer poker tournament

Nov 28th, 2014 – 1 Comment

It seems that the company has not been doing enough to deliver the growth needed to drive the price higher.


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MGO LOGO

Hi Lou,

Check out Migao Corp!

Arnold, Vancouver

 

 

Hey Arnold,

Thanks for the assignment. Migao Corporation (MGO TSX) operates in four locations in China where they produce potassium nitrate and potassium sulphate. These specialty potash fertilizers are used in the production of high value agricultural products such as tobacco, fruit, cotton, flowers, and vegetables. The prospects for the potash sector have been volatile since the summer of 2013. The dissolution of a Russian producers cartel that controlled 40% of world production sent prices for the commodity and companies producing the mineral rapidly lower. By late 2013 the cartel’s members were back in league and setting production levels to strengthen pricing.

Before examining the charts its important to look at some of the risk factors associated with MGO outside of how it trades. Its market capitalization of $60.3 million puts in the micro-cap category which gives the stock a higher risk profile. Liquidity is another issue that has to be addressed. The average daily volume over the last three months has been 23,333 shares per day. With thin trading it makes it difficult to get tight execution on buy and sell orders.

Now to the charts and what they can reveal about the trend, support, and resistance at play with this stock.

 

MGO

The three-year chart outlines the decline that started in February of 2011 when the shares were trading over $8.00 and endured until late 2013. The shares caught a bounce  that took the price from a 52-week low of $0.96 to resistance near $1.50 by April of 2014.  MGO traded in a tight sideways pattern through November of 2014 when the stock broke below the 50 and 200-day moving averages.

 

 

 

 

 

 

MGO2

The six-month chart isn’t providing much in the way of  buy signals. It appears that MGO is on the cusp of forming a death cross and the momentum indicators are neutral at best. It seems that the company has not been doing enough to deliver the growth needed to drive the price higher. If you are committed to the fertilizer space you would be best served to look at some of the bigger players in order to remove some of the risk from of your investment.

Make it a profitable day and happy capitalism!

 

 

 

 

 

 

 

 

Categories: Fertilizer
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