Potash Continues to Impress

Apr 26, 2008: 4:47 PM CST

Potash (POT) is a stock I have been following for over a year now, and it has continued to be an impressive stock that has treated its investors phenomenally. What happened last week and why was it important?

Potash beat earnings expectations by $0.22 last week, and increased its outlook for the future.

“The world’s largest fertilizer company by capacity, Potash Corp. produces the three primary plant nutrients. It is No. 1 in potash capacity, No. 2 in nitrogen and No. 3 in phosphate.”

With those two factors behind it (exceeded estimates and raised guidance) you would think the stock would surge – even gap – on that news, right? Well, yes, but that’s not what happened.

The stock fell 5% that day and then continued to fall further the next day, declining almost $30 before finding support for traders to get better positions.

Sometimes, it’s best to fade the news, no matter how great the news is. Let’s look at the charts:

Notice the consolidation period which occurred through most of February and March which resolved into the ‘trend move’ or price swing to the upside. The moving averages have provided key support for this stock for quite some time.

Let’s look at the stratospheric rise of Potash Corp:

Don’t you wish all stocks behaved as nicely as this one?

This stock shows how it can be rewarding to find a solid stock, perhaps from a fundamental analysis scan, and then hold your conviction for as long as possible, or until a clear reversal signal is given.

Until price breaches the rising 20 period EMA, odds generally favor higher prices. Be sure to watch for a potential ‘blow-off’ top as more and more people get involved or interested in this stock. When everyone sees and expects the same thing, odds are the trend is about to end.

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