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Agrium (AGU) on a Technical Teeter-Totter

AGU at $89: confluence zone or testing the uptrend?


Not many stocks this year are in the minus column for the year, but those that are may get even weaker if and when the broader market corrects by a few percentage points.  One company that seemingly couldn’t get out of its own way was agricultural chemicals firm Agrium Inc. (AGU), year-to-date lower by 11%.  At its peak for 2013 the stock was up by 15.50% in late January, but has since sold off just about 23%, closing last Friday May 24, at a new year-to-date closing low.

agu weekly
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To be sure, AGU isn’t the only agricultural chemicals stock that looks prone for lower prices.  Monsanto  (MON) too has arrived at a critical support line which, if broken, could accelerate the stock lower by a few percent at the very least.

Through the lens of a multi-year chart looking back to late 2008, AGU stock continues to trade in an uptrend, but with last Friday’s close this uptrend is getting tested once again.  Any further weakness in the stock thus would snap this uptrend and cause a change in posture for the stock.

AGU daily chart
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Last Friday’s closing price near the $89 mark also coincides with an area that acted as resistance from March 2012 until July 2012.  Furthermore, the area around $89 also represents a 61.80% Fibonacci retracement of the entire rally from June 2012 up to January 2013, making this an important confluence zone area both on the daily chart at right as well as on the weekly chart above.  Should the stock fall below there on a daily close, it will enter somewhat of an air pocket as there isn’t any real support until roughly the $75 area.  On the upside, if the stock can overcome the $92 level it would be a first indication that the confluence support zone around $89 did its job.

Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter.

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