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 accomodative for the foreseeable future [for more commodity futures news and analysis subscribe to our free newsletter].
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 15th, 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 [see How To Lose Money Investing In Commodities]:
Kinder Morgan Inc. (KMI)
Consider KMI’s one-year daily performance chart below.
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 (POT)
Consider POT’s one-year daily performance chart below.
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.
Disclosure: No positions at time of writing