Potash Corp Saskatchewan (POT)

The move by Potash (POT) lately serves as a prime example of what we are looking for. It fits two of our profiles of what is working in the current environment, being both a commodity stock and a big cap with international exposure. And the price and volume action, not to mention the chart, are superb.

Potash producers in particular have been graced with considerable good news of late regarding demand for their product. And today the entire fertilizer sector got a boost on news that the Chinese (yep, them again) are in negotiations for a major purchase.

Price formed a cup with handle base. Volume mounted as the right side of the base was forged, exactly the kind of action you want to see in an imminent break out. The stock first broke out of a handle that was a bit low in the base. These buy points are usually best avoided although in this case the gambit has worked. A second, more proper, handle was established over the last few days, wedging lower on volume that evaporated. With volume reaccelerating the stock started breaking out yesterday and today broke completely out of the base scoring 52 week highs. It is extended here but looks promising for further gains in a continuing bull market.

We’d recommend purchase on a pullback to the $119 - $120 area. Of note POT has no significant resistance until $140 - $150 and those prices are from September 2008. History suggests that after a year overhead supply becomes less of a factor, auguring well for this play.