POT update

pot june 28 2016 bpot june 28 2016 s

We have been neutral on this stock for a while now. Given the up and down movements over the past five months or so, without any clear progress one way or another, it is highly probable that a triangle or some other consolidation structure is forming. More often than not these are ultimately resolved in the same direction as before, that is down. A reasonable guess would be by about six dollars which would put the ultimate low at about $15 to $16. It does not have to go that far, but as we pointed out earlier, a total retracement of the bubble move up would be around $10. That is a lot of room for error so we would keep an eye on the RSI and MACD or any other technical indicator you might prefer.

For the record, buying at about $16 is buying at about one quarter of the takeover price back in 2011 or 2012. That price was then dismissed out of hand by the premier of Sask., whos government was, to a great extent, responsible for the creation of the monopoly without which this bubble would never have existed. Never mind the outrageous income received by the American CEO.

POT update

pot jan 25 2016 bpot jan 25 2016 s

Potash is down another $9 or so since our last blog. We are not yet at an ideal target but we would not want to outstay our welcome either. Here or at about $18 a neutral stance is warranted even if we believe the stock might drop all the way to $10 or even lower. All the requirements of a large a-b-c and a 5-wave sequence in that c wave have been met. Even the 5th wave, shown on the right has the right number of subdivisions (but RSI is not yet oversold).

Farm income has dropped to about 55% of what it was in 2013. Potash is bought when there is money, not when it is needed, so there is no reason to get bullish.

POT, going to pot?

POT sept 22 2015

Back on July 30, 2013, when this stock was essentially at the same levels as it is today, we unequivocally opined that the drop was not over and that we should first get a 4th wave. We did even if it took longer than we would have expected. This is a large A-B-C in which the C will probable turn out to be a “diagonal”. This is normal for commodity stocks that typically have outsized 5th waves.

Potash is the product of a lot of engineering by the province to create a monopoly (or oligopoly). Not surprisingly then that the Premier got real anxious when there were threats to this business model when BHP showed an interest in expanding production and perhaps even stepping out of the cartel, this despite having advocated an open-for-business approach. Things went wrong because monopolies only work if the monopolist has the luxury to wait forever. As soon as some form of dependency is created the pull towards expanding production becomes irresistible.

You could have sold at $62 right after the bid. You have already lost half of that. If you hold and this EW interpretation turns out to be correct you will loose another 2/3 from here.

POT, Potash update, Live by the sword …………………… .

POT july 30 2013

We commented  just 4 days ago (see previous blog)  that this stock should accelerate to the downside soon. 20% in a single day is more than we expected but also nowhere near where we think it will end (about $10 ). For today it is probable a bit overdone but clearly today’s move is a third wave of some degree so , as a minimum, expect a 4th and 5th.

Today’s comments on BNN and I am sure other entertainment channels are interesting for their complete and total stupidity. One commentator suggested that this was entirely predictable (inventories are 37% above 10 year averages, wheat is selling at substantial lower prices and China is less hungry or is now producing it’s own.) In reality, of course the cause is pretty simple. A monopoly (and almost all of Canada is a monopoly or an oligopoly) allows the producer to manage (restrict) supply and collect “rents” well above their wildest dreams. Often this is confused with good management. Under globalization these setups that used to be illegal (see anti trust laws etc.) are increasingly attacked by the market itself. Takes a long time (see banking, telecommunication, dairy products, wine etc.etc) but eventually it happens. The surprise is that in this case it is the Russians (not known for their free-market leanings) that gave the impetus to this change leaving the Canadians as swing producers instead of price setters. Those that bought Mr Brad Walls story how Pot. was worth more than the $62 take-over price now may regret not having sold. If not they probably will in the future.