SURGING GRAIN PRICES PUT STRONG BID UNDER FERTILIZER STOCKS -- MOSAIC AND POTASH EXCEED 200-DAY LINES -- CF INDUSTRIES NEARS RECORD HIGH -- AGRIUM HITS 52-WEEK HIGH -- RYLAND IS LATEST HOMEBUILDER TO EXPERIENCE BULLISH BREAKOUT
CORN LEADS AG MARKETS HIGHER... Agricultural commodities have been on a tear over the last month. Chart 1 shows the Power Shares Agricultural Fund (DBA) in a parabolic rise since mid-June. Most of that surge is coming from grain markets as the result of drought conditions in the midwest. Corn, wheat, and soybean prices have seen especially big gains. Chart 2 shows the Corn Fund (CORN) surging to the highest level in ten months. Notice the big jump in volume in both agricultural ETFs. One stock group that is starting to benefit from surging grain prices is fertilizer stocks. Farmers will need to buy more fertiilzer to plant bigger crops during the next growing season.
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Chart 1
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Chart 2
SPECIALTY CHEMICALS INDEX RALLIES... Chart 3 plots the Dow Jones US Specialty Chemicals Index which is a subset of the materials sector. The chart shows the chemicals index surging to a two month high and within striking distance of its spring high. Its relative strength line (below chart) is close an upside breakout as well. Most of that strength is coming from stocks that produce phosphate and potash crop nutrients (or fertilizer). Two stocks in that group that have surged lately are Mosaic (Chart 4) and Potash Corp. of Saskachewan (Chart 5). Both fertilizer stocks have cleared their 200-day averages on rising volume.
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Chart 3
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Chart 4
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Chart 5
CF INDUSTRIES NEARS RECORD HIGH WHILE AGRIUM BREAKS OUT ... An even stronger chart pattern belongs to CF Industries (CF). That fertilizer stock is nearing a test of its spring high. A close above that chart barrier would put the stock at a record high. Its relative strength (below chart) has already experienced an upside breakout. Chart 7 shows Agrium (AGU) having broken out to the highest level in a year. It now appears capable of reaching its early 2011 peak. Its relative strength line (below chart) has broken out as well.
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Chart 6
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Chart 7
RYLAND BREAKS OUT ... My June 30 message showed a number of homebuilding stocks that had already broken out of major basing patterns. I suggested that Ryland appeared to be the next likely breakout. The weekly bars in Chart 8 show Ryland (RYL) trading above its early 2010 high at 25.64. That puts Ryland on the growing list of homebuilders that have initiated new uptrends.
