After last week’s weakness, I’ve been cuing up potential shorts in the event we continue and actually follow through to the downside. As I scanned the sectors, one that jumped out was the agribusiness field, which has been showing some interesting patterns to play from the short side.

If we were to roll over again, then I’d want to be short the weakest sectors I can find. Three stocks I believe that are ripe for the harvest are Monsanto (MON), Mosaic (MOS), and Potash (POT) and I will detail the technicals below as I lay out a thesis for playing each of these if the US market continues to deteriorate. As always, should these trades trigger and you were to take the trades, calculate your risk and take an appropriate position size for your portfolio. In full disclosure, I’ve started small positions in Monsanto (MON) and Potash (POT) already and will be looking to add should they continue to break down.

Monsanto

The Trade: Short below last week’s low of $75.85 with a stop at the top horizontal trendline or 50 MA.



Pull up a daily chart of Monsanto and a trader will see that it’s already had a good downside move, making any new trade a bit more risky. With four consecutive days of solid selling, Monsanto has already retreated from Tuesday’s intraday high of $80.36. After butting up against overhead resistance at the descending trendline for weeks, Monsanto decided to take out the 50 MA (on the weekly) with authority. With both of these markers now pressing down from above, it’s a good candidate for more weakness. A keen trader may see that there’s still open air down to $70.00 on the chart, where substantial support was had in the past. Any position should include a protective stop, and the break of the 50 MA or the descending trendline are reasonable areas.

Mosaic Company

The Trade: Short on break of bull flag. Stop at upper trendline.



Like its brethren, Mosaic has already enjoyed a solid downside reversal. If the market turns up next week, then all bets are off on it. However, several traits in the current pattern make MOS enticing for possible further weakness. When the overall markets were hitting new highs for the year just a few short weeks ago, Mosaic was already trading well off of its multi-month highs. These cracks in the armor have turned into a possible bull flag or asymmetrical triangle, depending on your interpretation. Either way, if Mosaic breaks below these support areas, then continued momentum can be expected and a trader would be wise to follow the trend. Mosaic does have support from the 50 and 200 MA underneath as well as an ascending trendline, so a profitable short sale is not without its pitfalls. If Mosaic tackles and pierces these areas on volume, then a trader would have additional confirmation for playing this fertilizer giant.

Potash Corp. of Saskatchewean

The Trade: Short trendline break or 50 MA. Stop above right shoulder.



Potash is also setting up a multi-month rollover which could transpire into a fertile breakdown if investors continue heading for the exits next week. Potash has formed a series of higher lows and lower highs resulting in an eventual squeeze and resolution. Since technical patterns are merely footprints of market participants, there’s no denying that whatever definition you care to impose on the chart that Potash hasn’t been a market leader for some time. A head-and-shoulders break is also possible, and technicians will be able to see that completion of this pattern to the downside would result in many more points being taken from the stock price. The caveats to be heeded are the recent support it found at the 50 MA and the ascending trendline, so a trader might demand that these levels be taken out for confirmation. The 200 MA is also an area that Potash might see sizeable support coming in from institutions.

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