The backstory: The agribusiness sector — industries such as agricultural chemicals, fertilizers, animal health and equipment — is into levels we haven’t seen since 2008. My recommendation is to play VanEck Vectors Agribusiness ETF (MOO).
MOO is up 18 percent year-to-date and, with nice volume last week, it looks ready to make another move to the upside from a double bottom. We retouched a low from late 2015 — which ended up as a confirmed double bottom — that was last touched previously in 2011.
The big picture: Economies are improving around the globe, increasing demand for imported agricultural commodities and finished goods. Japan is very strong and getting stronger, with the iShares MSCI Japan ETF (EWJ) finally back to where it was in 2008. The Canadian index – the S&P Toronto Stock Exchange Composite (TSX) — broke out last Friday to $15.95CAD, an all-time high. When Canada, which has been late to the bull market, finally shows up to the party, we know economies in general and agriculture in particular are getting stronger.
How I’m playing it: On MOO, I will take a position if it breaks to the $60.25 mark. I’m also long two individual stocks that are part of the ETF: Agrium Inc. (AGU.TO) and CF Industries Holdings Inc. (CF). I have owned AGU since April 2016, when I bought 300 shares at $108CAD; it closed at $137.61CAD on Friday, and is in the process of testing all-time highs for the third time. It’s a beautiful ascending triangle on a monthly chart, and I will add to this position on a breakout. If it fails this third breakout, that’s the point where I close this position but, usually, the third time’s the charm.
I’m long CF in both my personal and long-term portfolio for my members, buying in Sept. 7 at $31.32 for 330 shares. It’s up just shy of 19 percent since, but while it’s a long-term hold, I will selling two-thirds of my position (220 shares) before CF reports earnings Nov. 1.
This is one of my standard practices, by the way: I don’t like holding positions through earnings. If it’s a swing trade, I sell my whole position; if I’m long, I sell half to two-thirds. I’ll explore the reasons for this strategy in another post soon.
Petra Hess runs PetraPicks.com. She is a technical swing trader and long-term investor in domestic and Canadian stocks and ETFs. At the time this article was published on RagingBull.com, she was long in AGU.TO and CF as described above, but held no position in MOO or EWJ.