Agriculture & Fertilizer Stocks

AG Stock Trades

Wednesday, May 28, 2008

4 Stocks in Trouble

I see the identical pattern in 4 charts, so I am cutting back exposure to all 4. These have the makings of companies that could be beginning to break down. If I am wrong, I'll pay up a slight premium to regain exposure once the technical pattern improves. The names are different but it's the same pattern - 4 companies which are breaking down below their 50 day moving averages. Unless they quickly reverse back over and above, this could portend a more serious move downward.

I see a lot of other companies which could be approaching a similar set up with another day or two of bad behavior - i.e. we could have a lot of charts rolling over. So despite the tepid bounce-back in the indexes (which we said in the weekly roundup would not be surprising as nothing goes straight down), I am seeing some things I do not like in individual charts.

Mosaic (MOS) reduced to 1.2% exposure (from 2.2%)
CF Industries (CF) reduced to 0.6% exposure (from 1.2%)
Gafisa (GFA) reduced to 0.8% exposure (from 2.0%)
Ctrip.com (CTRP) reduce to 0.7% exposure (from 1.3%)

The first 3 names closed below this key level today; whereas the latter has been below for about a week, but since it bounced a bit today I am using that as an opportunity to cut since I missed doing so on the initial breakdown.

These moves take another 3.3% away from long exposure and into cash. Although a bounce was expected in the indexes as (a) the market lost 3.5% last week which is huge for an index and (b) the S&P 500 is now at a key long term support level, the 50 day moving average of 1377 - I continue to be cautious in the mid-term, although hazarding a guess of the day to day action is a fool's game. But I'm going to let the individual charts tell me the story; these 4 have turned (perhaps temporarily) for the worse, and there are quite a few others with potential to follow suit.

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