Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter.
Monsanto Co. (NYSE:MON) – This company provides agricultural products such as seeds and herbicides. It is part of the basic materials sector, which currently doesn’t look very good, i.e. broken charts, similar to the broader market. However, the agricultural chemicals industry chart look more constructive and more in line with the charts of MON stock that we are about to look at.
The weekly chart of MON looking back to early 2009 shows a nice double-bottom formation in 2010. After confirming the double-bottom, the stock proceeded to run higher and eventually found resistance at a downtrend line (downward sloping blue line) in late July this year. More importantly, however, is the $62.50 area, which in 2010, served as resistance, and has held as solid support so far in 2011.
On the daily chart looking back to early May 2011, note again the support level at $62.50 and downtrend resistance currently coming in just below $76. Last week, the stock found resistance at the 50-day simple moving average (yellow line), but then yesterday, after making a higher low, had a big up day by rallying almost 6%.
The trade I see setting up is to go long MON stock on a daily close above $70.50, which corresponds with the 50-day simple moving average (yellow line). Stops can be placed near $68 with an initial profit target near $76. On a break above the downtrend line at $76 further profit targets need to be evaluated.
- See Sam Collins’ Daily Market Outlook: Top ETFs and Stocks to Buy Now
- See Serge Berger’s Daily Market Outlook: Market Still in Downtrend Despite Rally
- See Sam Collins’ Trade of the Day: Buy Mosaic on Weakness
