Two Commodity Stocks to Sell on the Pop: Kinder Morgan and Potash

By Commodity HQ  NOV 20, 2013 10:45 AM

These companies may offer an attractive short selling opportunity for those looking to bet against some of the stellar year-to-date run-ups already seen across Wall Street.

 


Buyers remain in the driver’s seat with the gas pedal to the floor. Hopeful bears were rudely reminded of the main price driver at hand last week when new Fed Chairwoman Yellen managed to bolster markets higher after she reassured investors that monetary policy will remain accommodative for the foreseeable future.

Amid the ongoing “No-Taper” rally at home, many remain hesitant to jump in long  ahead of the silently approaching federal government funding deadline on January 15, 2014. As such, below we highlight two commodity stocks that may offer an attractive short selling opportunity for those looking to bet against some of the stellar run-ups already seen across Wall Street.

The stocks included here are deemed to be great trading candidates for three reasons. First and foremost, each of these companies boasts a market cap upwards of $1 billion along with average daily trading volumes topping the $1 million mark, in an effort to weed out smaller, more volatile, trading prospects.

Second, these securities are trading below their 200-day moving averages, thereby implying that they are in longer-term downtrends. Lastly, these stocks are also trading above their five-day moving averages, which makes them attractive for swing traders looking to sell short before they resume their downtrend. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques:

Kinder Morgan Inc. (NYSE:KMI)

Consider KMI’s one-year daily performance chart below.


Click to enlarge

KMI has managed to hold around the $35 level in an effort to rebound off support, but this latest attempt appears to be fading away; notice how this stock has posted lower-highs (red line) since peaking at $41.49 a share in late May of this year. Although it has managed to hold its ground for now, we feel that further selling pressures could sweep over KMI judging by its downward sloping support line (blue line). We expect for KMI to continue drifting lower over the coming weeks until it can definitively settle above $36 a share.

Potash Corp (NYSE:POT)

Consider POT’s one-year daily performance chart below.


Click to enlarge

POT has been trading sideways with an upwards bias since its steep sell-off in late July earlier this year. Despite this encouraging price action over the last three months, POT remains in a worrisome downtrend judging by its failed attempts at conquering the $34 level (red line) on several occasions. A definitive break above $34 will be necessary to spark a meaningful trend reversal, otherwise we expect for POT to retest $30 a share if it fails to hold above $32 over the coming weeks.

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Editor's note: This article by Stoyan Bojinov was originally published on Commodity HQ
No positions in stocks mentioned.