Jim Cramer analyzed Mosaic's chart yesterday in his show and he likes it. Recently Daniel Loeb got behind Mosaic (MOS) as well. Loeb thought the stock price was depressed because Cargill family was selling their stake in the company. Loeb paid around $65 for his stake. The stock is currently trading around $70. Here is what Jim Cramer said about Mosaic's technicals in his Mad Money:
It's difficult to be constructive but, I don't want you to be frightened by today's horrible, terrible action, and therefore not be able to make any money. Now, has this market been difficult? How about extremely difficult. And very treacherous. But for the first time in a long time, down 6% from the high. You know what? The sell-off is starting to give us some opportunities to buy high-quality stocks. And I’m talking about at these levels. I’m talking about stocks of companies that are levered to strong multi or secular trends. I mentioned agriculture last week right? The need to get more food out of the ground, feed a growing world population. It’s also consuming more grain-intensive foods, like beef and pork. Great interview by Ken Pow in the Financial Times yesterday. Talking about how when people get into the middle class, they want to start buying better food. And there's also a global food shortage. Just witnessed the horrific famine in Africa right now. And the companies that helped solve that shortage; I think they're going to be long-term winners. Stop trading, people have to eat.
So, tonight we're going off the chart, with the assistance of Tim Collins, an undaunted -- a chartist, to identify an AG stock that looks like it could be ready to pick up some serious momentum. Alright check out -- this is the stock you ask about all the time, so I’m going right to the chart. Check out this chart of fertilizer king, Mosaic. MOS for all you home gamers. I’m a potash fan, but mosaic will do the job. Collins thinks mosaic is fighting very hard to resist this negative market, as I’m urging you to. In a nasty environment like this one, where we've had so many consecutive down days, charters have to look below the surface. Find stocks that could be poised for a breakout. Even that are messed by this miserable action. There aren’t a lot of stocks that are going straight up. Mosaic, for example, got killed today. It dropped $2.50, market sent down everything. Did you see anything that was up today other than gold?
What mosaic has though is a very powerful setup in the form of -- are you ready, ski-daddy? An inverse head and shoulders pattern. This is the absolute favorite the day you start technical analysis, this is like the first page of the text. Okay? Technicians are always looking for these patterns. A head and shoulder foundation, called that of course because, it looks like a person's head between two shoulders. That's a common sign that a Stock has topped. So, therefore of course an inverse head and shoulders is the same thing, only upside down.
One time I actually had to go to the chiropractor after I did this, I stood on my head, it was really stupid. Anyway, I’m not doing that tonight. This is a powerful indication that a stock has bottomed. And it could be ready to run. This is it. You’re looking at it. Even after today, okay? That's what Collin sees in Mosaic. The stock formed the left shoulder starting with the high volume sell-off in mid-may, which was confirmed with a sell-off in early June. Then mosaic broke down quickly, a big secondary too; and the head area was formed in mid-June, okay? And then it rebounded hard, and found itself forming this right shoulder. See this right see this right shoulder? Okay and that was almost identical to the one that was on the left. Oh, symmetry.
Now, why does Collins care so much about this pattern? Because, when a stock that just made an inverse head and shoulders crosses what's known as the neckline -- okay? That's the neckline -- the line that connects the two shoulders. Most technicians see that as a tried and true recipe for a major rally. And even though this might seem like nothing more than a big game of Pictionary, one of Cramer’s favorites. This is one of the most consistent patterns out there. If only because there's so many people following the charts.
Hey, look, we broke through some floors today, some support levels. That’s why the market went down really hard. It was more than -- the accelerant was the chart. Now I’m giving you a chart that's okay. I’m giving you a chart that might come true because of buying. With mosaic, there are two lines that could be considered the neckline. The first is the more aggressive one. It's a slightly downtrend line that Mosaic broke in late July. That’s the neckline and, it means that the time to buy mosaic is now. The second is a horizontal line. A little trickier here, you got a 7325 line.
Now in an ugly market like this, Collins does want you to wait for the conservative signal. In other words, he thinks you should wait for mosaic to break through that key 7325 level on high volume. Once mosaic breaks through that level, Collins believes that it can rally up to the mid-80s.
Now there's another pattern though, okay? Something we can see if we look at the same daily chart, but I wanted to put different lines on it so it doesn't confuse you. These are different sets of lines. Ever since mosaic bottomed; again, mid June right? The Stock's been making a series of higher lows. Another thing we like to see as technicians. That suggests to Collins that demand for the stock is increasing, not decreasing. mosaic went on to break through its resistance line, that's the ceiling above the Stock in late July and has now pulled back to test both the line and -- well as the uptrend -- upturning support line. The floor underneath the stock. That would be terrible critical line there. Collins thinks that as long as mosaic holds at these levels, as long as it stays around 69, right where the stock went out today, then you can buy it. Remember, you don't have the surety you would get if you would buy it up there, but he still this is you can buy it.
Now, this is the problem with technicians. If it falls much below that level, it would invalidate all these patterns that Collins is relying on. So, then he turns seller. That's why I am a fundamentalist, not a Technician. I like to buy my stocks as they go down as long as the fundamentals stick out. Now, I did check with him all day today, don't worry. I checked with him even in this redness decline, he says he's still on board with this idea that you can take a shot at this company right here. Although he would be much more sure if it were up there.
Now, won't you take a look at this chart, which compares the weekly price action in mosaic against the S&P 500. This picture's very revealing. See how there are these periods when mosaic will often lag behind and underperform the S&P? Then it will come back with a vengeance and close the performance gap. That’s something we saw in July of last year and something that began again this June. For Collins, the key here is to wait for mosaic to start cashing up the S&P and only then start your buying. In other words, this stock should not be bought when the gap is getting wider; it's when it should start narrowing. And lo and behold, ha; the pattern you cease in the moment is so similar to what has happened exactly one year ago. Frankly it's a little scary. I mean, it's just so perfect. That’s why Collins believes that mosaic is poised to outperform the market through the fourth quarter, possibly in this January or February of 2012.
This is -- you know, look, on a day like today when everyone thinks that nothing's going to outperform anything other than cash, it's refreshing. The agricultural momentum is coming back. The charts are almost [Inaudible 27:43]. I think the stock -- well, let's just say I think it makes sense here 20 points of a 2 week high. I want you to think of mosaic as a great way to play food inflation. A way to profit from the high prices at the Supermarket. AG is all about getting more crops per acre. And to do that, farmers need fertilizer like the kind of mosaic provides. This is a key part of a huge long-term secular growth trend. And, that why it's worth buying into. Here's the bottom line about this. The charts is interpreted by Collins and the fundamentals agree. Mosaic is a go-to place to buy in a completely hideous, intolerable, horrible stock market.
Fletch in New York. Fletch?
Jim: Yo. Yo. Chief.
Fletcher: Listen. My question is potash. I've had it for a while. I got the three for one split. What do you think's going to happen with it?
Jim: well, potash is -- this sector, I think, is a long-term play on the need to feed. Now, Potash (POT) did take a lot of the upside away when it rejected the takeover bid. However, the fundamentals are strong, I know that sounds like some sort of Holcomb -- on a day like today, like no one want to hear the fundamentals are strong. But, listen. I'm on the conference call, the numbers we're fantastic the guide up was huge! What can I do? It's doing well!
Gary in Oklahoma! Gary?
Jim: Hey, nat gas country.
Gary Well, a big sooner Boo-yah from Oklahoma.
Jim: A Boomer sooner to ya
Gary: Yea! And I did a silly thing. I bought some Manitowok (MTW) as my speculation and then I panicked with all the national debt talk and sold it at a loss. So tell me about it, did I buy the right stock?
Jim: The crane market did get soft. Let's understand each other. The crane market got soft. That’s what terrics told us, and MTW has now been -- wow, it's been almost cut in half. Is that right? It seems cheap to me, but you know what? You want cheap. I'm sitting here looking at some of these major, major -- looking at joy global, they have not said anything but positives about how things are going. And what happened to that stock? Down four today to 88. That’s a better play than MTW. Alright. You’re not putting your neck out on the line with mosaic! Its neckline performance is great. Is this the right level to be in it? If you're a technician, this is about the best chart in the book. MOS. so, hey, if you're a technician, I think you should buy it. Stay with Cramer.Jim Cramer’s Interview with PPG Industries CEO 8/2 Part II