Fertilizer Names Look Fertile

The companies that help us with grains and cereal crops more than livestock crops have shown some life recently and the charts are worth looking at. Last week I covered off some of the livestock food processors within the Agriculture industry. This week, the fertilizer names are starting to look like fertile places to consider.

Starting with Archer Daniels Midland, the chart sits on the breakout line of a two-year gently down-sloping trendline. This week, the chart is trying to move above it, but we want to see it close decisively above that level. The momentum line on the PPO looks ready to break here as well. That looks like a bullish setup.

Bunge (BG) is a very difficult chart to invest in, but one of the clues on the chart makes it more interesting. First of all, the big downward slide going on for years doesn’t look very good. The second component that gives me more interest in the name is the down-sloping momentum trend line looks like it is ready to break. That would at least suggest a change in momentum. For such a weak chart, I would want to see other names in the sector lead.

CF Industries is involved in the fertilizer business. I like the change in performance of the stock as shown by the SCTR ranking. The break above $32.50 in price looks good and is continuing this week. There is a little bit of horizontal resistance at the blue line, but the stock looks set to challenge that very soon. I do like break in the PPO down trend. The break in the one-year PPO trend line is where the stock really started to accelerate.

Mosaic is also involved in the fertilizer space. The chart had a massive move out of the base last week and looks set to continue higher. This week it is breaking through a two-year down trend line in price. The PPO trend line breaking suggests to me that the chart trend is also changing. The technical ranking in the top panel suggests the chart price action is in the top 25% of all large caps.

The last chart in the fertilizer group in Nutrein (NTR). This is a merger of two solid companies in the space. One was Agrium and the other was Potash Corp a few years ago. We can see the PPO trend line breaking the two-year down trend which suggests momentum is trying to change as well. Price is up aggressively this week as it breaks through resistance.

After looking through all the charts, it looks like these names are all starting to break out to the upside. I find it particularly bullish that they are breaking the momentum trend lines before or at the same time as the price trend lines.

At the time of publication, Greg Schnell owned shares in one of the charts mentioned.

Good trading,

Greg Schnell, CMT, MFTA.