The set-up: Many agriculture/agribusiness stocks reached all-time highs in 2008, right before the crash; a number are finally testing those levels again. As of Friday’s close, VanEck Vectors Agribusiness ETF (MOO) is up 44 percent since January 2016, and 16 percent year-to-date; it’s nearing $66.25, its all-time high from 2008. Even with that gain, fertilizer and other agro products remain mostly off-the-radar, despite being needed to maximize worldwide agricultural output.
The outlook: After this long consolidation, if the stocks in this sector break to all-time highs, it’s blue-sky sailing. There’s nothing holding us back technically. Food prices have crept up and I think we’re only at the very beginning of food inflation. Chemicals are strong, as are farm and construction equipment. That whole sector is very tradeable right now.
How I’m playing it: There are four stocks I’m looking at: Agrium Inc. (AGU), Potash Corp. of Saskatchewan Inc. (POT), CF Industries Holdings Inc. (CF) and Monsanto Co. (MON). Of those, I am only long in CF; I bought 700 shares Sept. 12 at $31.32; it’s now passed $35 and I see no sell signals on the horizon.
Agrium is testing a gigantic breakout zone to new highs. I am looking to buy AGU on any breakout around $111. POT is nowhere close to its all-time high, but is at an interesting resistance level; if it breaks through $19.67, there’s a great trade to be had. CF is well off both its 2008 level and 2015 high, but I see a breakout area on the weekly chart; I will look to add to my CF position on any break over $36.50, expecting clear sailing right up to $42. Monsanto also is ready to break all-time highs; it’s at $121.28, and right around $126 is where MON gets very interesting for me.
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 had 700 shares of CF and was planning to buy more under the conditions described in this commentary. She had no shares, options or open orders in AGU, POT and MON.