Fertilizers: Momentum Sell Signals This Week

Going into MOS earnings this past Thursday morning (3/29), there were strong momentum reversal signals generated across the Ag space, and more specifically in the fertilizer sub-group; MOS, CF, POT, AGU. When I look for a trade in a specific issuer, I like to see signal breadth across the sector; this was the case in the fertilizer's - all generating momentum sell signals - 'Type 1' - liquidation indicator. This can be seen by referencing the above mentioned fertilizer names, and the the 'IntraS' column, which indicates 'Intraday' system signal. These 'Type 1' signals, when consistent across a group, represent aggressive long liquidation of inventory and momentum initiating the short bias.

Lets have a look below at what POT did this past week: We can reference 3/28 'SE 45.43' early in the trading day and the 'red arrow' indicating the sell signal. We can observe POT breakdown, below the 3 day regression structure, which is our short term directional bias indicator -- implying that when price trades < the regression, the market is transitioning into a short, short term bias - in line with the aggressive ATR expansion to the downside. When we have rotation initiated from this signal type (IntraS column - from the screen above) there is an activity of 'urgency' demonstrated from larger funds as per the 'nature' of the outflow. We can capture this display of behavior and align with the new bias. This signal is consistent with the other fertilizers  in  the group and so confirming the breadth and quality of selling behavior.

In the next screenshot below, we can reference the 'structure' of POT. The 'Blue' horizontal lines represent the weekly channel structure of POT; 47.65-43.91. I've also referenced the 'sell signal' with the red arrow as discussed above. POT moved into the top of its existing weekly channel structure and rotated back down, initiated by the 'SE' at 45.43 (above). The trade destination would be the lower end of the weekly channel at 43.91. As of Friday (3/30) the market was stabilizing within the regression structure. Any closing above the structure would violate the short signal and short bias generated on 3/28. So we keep a tight stop above this channel.