POT What?

Feb 22, 2008: 10:04 AM CST

I have been following Potash Corp for almost a year now, due to the stock’s stratospheric rise among all stocks, especially fertilizer producers.

The recent chart patterns have been interesting, including a major busted chart pattern which threw traders for a loop. Let’s look at the recent patterns that setup in this high-flying stock:

The background is a major uptrend, and so we can expect long (buy) trades and should be looking for those opportunities.

Notice the triangle consolidation that formed throughout November, which broke sharply to the upside, completing its measuring rule price projection (height of the triangle).

Notice how this price expansion swing led to a shallow, 45 degree angle pullback into the 20 period moving average, which set up a classic bull-flag (and “impulse buy”) trade. To obtain the price projection, expect a measured move (equal swing) from the start of the flag. Notice how this was achieved perfectly before price rolled over into a new retracement.

Price then experienced a classic retracement and then experienced a violent upswing before… collapsing.

Generally, in an uptrend, position traders (and especially swing traders) utilize trailing stop strategies with extremely strong stocks. These trailing stops are placed a certain percentage away from price, but most strategies call for placing stops a close but comfortable distance beneath the key 50 period moving average (blue line).

Notice how price slammed beneath this line during the January 22nd market “mini-crash” and then took all these traders out on very high volume. Perhaps new short-sellers joined, hoping to capture a large move down from this euphoric stock.

They got that large move down, but just as soon as it unfolded, it was over within a period of days, and the behemoth stock was back above the averages and found support three times there before making new all-time price highs (along with other commodity related stocks).

It’s an interesting study in triangles and bull flags, with the bonus of seeing a busted expectation pattern on both sides of the market. Take care trading this massive money maker.

3 Comments

3 Responses to “POT What?”

  1. Stock Market » POT What? Says:

    […] Afraid to Trade.com Blog – Overcoming Fears wrote an interesting post today on POT What?Here’s a quick excerpt I have been following Potash Corp for almost a year now, due to the stock’s stratospheric rise among all stocks, especially fertilizer producers. The recent chart patterns have been interesting, including a major busted chart pattern which threw traders for a loop. Let’s look at the recent patterns that setup in this high-flying stock: The background is a major uptrend, and so we can expect long (buy) trades and should be looking for those opportunities. Notice the triangle consolidati […]

  2. Large Pot Says:

    This is cool! And so interested! Are u have more posts like this? Plese tell me, thanks

  3. Stock Pot Says:

    This is cool! And so interested! Are u have more
    posts like this? Please tell me, thanks