AGU , Agrium update

February 9, 2016February 9, 2016 Hamilton

In 2012 this stock looked ripe for a drop. All the others did but not this one, which is plain to see from the relative performances.

So Agrium did not behave as expected and went on up for about three years, making a new high in early 2015. This move from the 2009 lows is messy and has a lot of overlap, but if you break it down you have two distinct, almost equal, legs up. In the middle there is a pause which has all the characteristics of a running correction. The whole thing is quite symmetrical which is why we prefer the B-wave scenario to that of a 5th wave. Both, by the way, would have the same target around $25, by they would differ in how you get there. (a single 5 wave sequence or an a-b-c ).

Ultimately AGU should join the others once again somewhere near the 2006 levels. This would make an interesting pairs trade, long 5 POT(or MOS) against short one AGU.

AGU, POT, MOS updates

March 12, 2013 Hamilton

We got AGU wrong, it went roughly $20 higher than expected, but the other two , more or less right. If we HAD to own one of these, it would most definitely not be Agrium. All things being equal – they never are – we would prefer Mosaic in terms of potential. Actually we would prefer the market neutral pairs trade, short one AGU for long two MOS. Here is what that looks like;

AGU, Agrium update

August 9, 2012September 19, 2012 Hamilton

The usual “then” and “now” charts;

On the left what we expected a year and a half ago. It did not happen that way. The stock did in fact peak at the about $95 level AND pretty well in the indicated time-frame. Furthermore it actually drops about $20, but then it miraculously recovers from the Oct. lows and is now trading essentially where it was then. We would , of course, blame the QE3 or operation twist etc. for this waste of time, others would applaud the intervention. In EW terms the anticipated B wave basically morphed from a simple a-b-c to a double zig-zag or an a-b-c X a-b-c. We could go a little higher but considering the proximity of double topping, don’t bet on it. Potash never had this time extension!, see the 10 preceding blogs under POT and the chart below;

Now some quasi-analysts are recommending AGU, particularly now that we are experiencing a crop killing drought in the US. This is a rather over-simplistic take on the matter. Potash does not create water in the soil, it is simple a mineral required for the proper growth of the crop. In the process the plant absorbs the mineral and a good part is removed at harvest. However, if there is a major crop failure, especially one where the crop is simple ploughed under, the nutrients stay in the soil and can be used for the next crop. Also farmers are rather straightforward in their approach, if they have money they buy, if they don’t, they don’t. So for the immediate future, the drought situation does not help at all!

Corn or maize is often cited as the potash-selling-crop du jour. The price will keep going up for years to come and potash will almost walk out of the warehouses by itself, at ever higher prices. There is a problem with this view which becomes evident as soon as you look at a longer-term chart of corn. They are hard to find so most cannot be bothered, but here is one from sharelynx ;

It does not run to today so I have added the usual Sharpchart that is as of this moment. It suggests that a high of $900 is possible, probable in the very near future, which would be consistent with the long-term chart. The interesting thing is that corn only broke out of a range in which it had been from about 1973 to 2008, or roughly 35 years. To assume now that since it has more than tripled from an average of about 250 to the present price of 800, all in 4 years, it will continue this climb straight up is ridiculous. Statistically speaking , chances are much greater that the price will drop back. If the indicated count is correct it will. A look at the stuff itself, that is potash tells a similar story;

The drop from the peak near $900 is an unmistakeable 5-wave sequence, indicating that the trend is now down. So far it has barely managed to retrace more than about 30% of the drop. With the stuff trading at about one half of what it traded at near the peak, it is difficult to justify a stock price for AGU that is within 10% of its all time peak. Remain bearish.

SNC , CRB (Jeffries), AGU , RDS.a and the B-Wave.

January 20, 2011January 20, 2011 Hamilton

In EW terms the B-wave is normally the mid-wave in an A-B-C, correction, (by definition 3-waves). They tend to have an inordinate amount of symmetry and seem to ignore all fundamental information being almost oblivious to the rest of the world. There are 2 basic problems with the B-wave. First of all what may be 3 waves now can always develop further into 5 –waves and thereby stops being a B-wave. Next they can, and often do, rise above the origin of the preceding A wave which, intuitively, seems to make no sense. Yet it happens like clockwork and sometimes with a margin of about 30%. Despite this , it still is a B-wave. Here are 4 examples (there are literally dozens of them right now).

and AGU.

Typically the B-wave will retrace 50% to 62% in most cases, sometimes more and , if it gets that far, it frequently double tops, as in SNC above. The symmetry is nearly always present for reasons I do not understand, markets just love symmetry. In most cases that means that waves c and a in the B wave are equal (as vectors). This is pretty much the case with all four examples. In some cases the symmetry goes further and all 3 sub-divisions in the B-wave are vector equal, as, again, is the case with SNC. Anytime you observe this symmetry it pays to be very careful as once the B wave is complete, it is right back down often to below the starting point. If by some oddity the top should occur at a rather precise Fibonacci number (61.8) as for instance with the Canadian dollar in Oct. of 2001 or 2002 and now with SNC, I would get out altogether.

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