Wednesday, October 22, 2008

Agrium Inc. (TSX): Expected to Go Lower

Once in a while I come across an interesting short term chart pattern that turns out to be a good forecast of things to come. Agrium, a Canadian stock, has been falling in price like most everything else. It now has one of those patterns. Agrium recently hit a low of $36 after peaking near $116 back in June 2008. At $36 it was down $80 from the high for a loss of 67 percent so far.

The chart is now saying to me that there is a very high probability that it will go below $36. The obvious pattern here is the decreasing volume pattern as the price moves more or less sideways near $40. One way to conceptualize what is happening here is that the number of buyers who are willing to pay this price, at this point in time, are running out. Once these "bottom guessing buyers" have their fill the price can easily resume it's downward travel.

If I was really gutsy I would short it now but I'm staying with shorting the TSX 60 Index. Its more of a sure thing.

1 comment:

Wiser Miser said...

Interesting analysis.