The Potash POT Plunge of June 17
Potash (POT) fell 11% on June 17th, slicing through daily support and inflecting down off the 38.2% weekly Fibonacci retracement. Let’s see all this up-close and learn a few lessons from this price movement.
Potash (POT) Weekly:
Without going into too much detail, focus on the closing high and low of the recent down-move and note that price was able to retrace to the 38.2% Fibonacci retracement (it makes no difference in this case if you truncate price spikes or not – using the spikes also produces the same 38.2% retracement).
Price hit this level at $121.70 and immediately inflected downwards, slicing weekly EMA support and breaking beneath the all-important psychological level of $100 per share.
If price continues lower, possible support would come in about the $80 level, which would reflect a prior ‘value area’ (price congestion) and the rising 200 week SMA.
Podash (POT) Daily:
On the daily chart, we also see a negative momentum divergence along with a complete five-wave Elliott fractal move up into the $120 resistance. Both were early warning signs that ‘something is amiss’ particularly when you add in the knowledge of the weekly 38.2% Fibonacci retracement.
Notice how price spiked up to this level above $120, formed a upper shadow/reversal candle, and then made one last dying gasp complete with three dojis (a tri-star doji pattern – three dojis in a row – is particularly bearish).
Today, we had a large volume spike and new momentum low not seen since 2008 – this is a sign that odds could (probably) favor lower prices yet to come.
Watch the $90 level for a possible retracement up but if momentum leads price, we will break this area eventually as well.
Lesson learned: An observable five-wave advance that forms a negative momentum divergence into the higher timeframe 38.2% Fibonacci retracement often results in a signifcant price reversal – or at least proves too much for optimistic bulls to overcome.
Corey Rosenbloom, CMT
Afraid to Trade.com
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