Shares of materials company Potash Corporation of Saskatchewan (USA) (NYSE:POT) are higher by just shy of 10% for the year and have likely frustrated plenty of traders of late. But a look at the charts with some perspective reveals a bullish pattern in multiple time frames, and thus one that in my eye that has much potential for higher prices in the near to intermediate term.
The materials sector of stocks of the S&P 500 as represented by the Materials Select Sector SPDR (NYSEARCA:XLB) exchange-traded fund for 2017 remains in a firm bull trend, which, in recent months, has been aided by a bid in the energy commodities. While certainly not all materials stocks are created equal, it is nice to see a general bull trend in the underlying sector.
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
For some perspective on shares of Potash itself, let’s look at the multiyear weekly chart. Here we see a stock that, after topping out in the year 2008, has since only managed to make a series of lower highs. POT stock has largely been basing since early 2016 through this lens and while still in the larger picture down-trend, from a momentum perspective it is certainly beginning to look more promising.
No cigar in this time frame just yet to be sure, but the grizzly bears on this stock would be wise to watch how the next few weeks or months unfold for a trend change from intermediate term bearish to intermediate-term bullish does look increasingly likely.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
Over on the daily chart, things look decisively more bullish as POT stock is visibly coiling up below a simple horizontal line of resistance between $19.50 and $20.
What’s promising about the recent price action is that after a rally in September back up to this line of resistance, POT stock slipped into a consolidation phase. This consolidation phase found a well-defined support level on Nov. 15 (green arrow), where my proprietary B2 Reversal Indicator also flashed an initial buy signal.
Bullish reversals such as the one from November 15th offer wonderful opportunities for traders and investors to put on income trades for monthly or quarterly income. If you would like to learn more about this strategy then please join my next webinar on this topic on Tuesday Dec. 5. Register HERE.
While a breakout past horizontal resistance ($19.50 to $20) has yet to occur, if and when this takes hold a next upside target at $21 opens up, possibly followed by next upside targets with $1 increments.
Check out Anthony Mirhaydari’s Daily Market Outlook for Dec. 1.
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