With the continued move lower in agriculture commodities (see why they were so weak), names like Potash, Monsanto, Mosaic, Agurium, and CF Industries all drastically underperformed the market for the past few months.
But things may be changing, and it's being reflected in the charts.
A great example of this is $POT. It completed a form of a 2b reversal, and is coming back up to retest key levels at 44:
Other stocks like $MOS have undergone a "higher low" which may signal a turning point in the stock. It too has a key level to watch just above price.
When many names in the same "bucket" start to exhibit similar technical patterns, it most likely means that they will all have pattern success or failure at the same time.
These technical patterns are lining up at an interesting point, because Monsanto reports this morning and Mosaic had a decent report last night. If these earnings give investors a better outlook on the sector, we could see enough buying pressure to fulfill these technical patterns.
As I write this, Monsanto just beat estimates, with a Q1 EPS of $0.23 vs $0.16 est, and revenues were on the high side as well.
Since MOS and MON are earnings plays, I would focus on a proxy long in POT. To get a more directional play and avoid changes in implied volatility, I would opt for a bull call spread.
A February 45/47.5 bull call spread could work well here, giving you enough bullish exposure to play for a breakout, but with resistance at 50 our expectations above that are limited.
Bull call spreads are limited risk, limited reward and they offer a way to play without a lot of vega risk.
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Stocks Mentioned: $POT $MOS $MON $AGU and $CF