Potash May Get Hot Again
Adjusting position size may help manage Potash's volatility.
Potash (POT) raised first-quarter earnings estimates to be in the range of $1.30 to $1.50 (above the initial guidance of $0.70 to $1.00 per share provided earlier in January), and enjoyed a good price reaction to this announcement. Since then, it has been eroding its reactionary gap virtually every day. Today, it retraced this gap almost entirely and has reversed on good volume. I think it can head back to the $127 area and if that is cleared on good volume, as the second chart shows, the eventual target could be around $140.
Keeping in mind that Potash is very volatile, I always adjust my position size because that helps me manage the volatility. Also, if the market decides to "rest," it might put a damper on Potash's plans, so it's imperative to control the size. A close below today's lows can work as a reasonable stop.
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