Bullish forces continue to prevail on Wall Street thanks to upbeat economic data releases coupled with persistent expectations that the Federal Reserve’s monetary policy will remain unchanged in the foreseeable future. To top it off, stock have enjoyed a largely news- and drama-free landscape over the past two weeks, allowing for sentiment levels to remain elevated alongside equity markets [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 much awaited “Santa Claus” rally as the end of 2013 inches closer. 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]:
FMC Technologies (FTI)
Consider FTI’s one-year daily performance chart below.
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This stock appears to be drifting alongside a key support level around $48 a share (blue line), which it previously rebounded off in mid-April of this year. While a trend reversal is certainly probable at these levels, we feel that bearish forces remain in control here for two reasons: First, from a technical perspective, FTI remains in a downtrend since falling below its 200-day moving average after a handful of failed attempts at conquering the $58 level (red line); second, notice that the highest trading volumes seen on 10/23 and 10/30 were both on down days, suggesting that buyers are still outnumbered by sellers. If FTI fails to summit $52 a share, there is a good chance it will retest $48 again and potentially even post a lower-low if support is breached with above-average trading volume.
Potash Corp (POT)
Consider POT’s one-year daily performance chart below.
Click to Enlarge
This stock has been stuck in a dismal trading range following its steep sell-off in late July of this year. POT has been oscillating between $30 and $34 a share for the last three months, failing to breakout to the upside on a handful of occasions since then. Given its lackluster momentum, we feel that short-term buyers and sellers will remain in a tug-of-war until a meaningful catalyst gives longer-term investors a reason to step back in. If POT fails to summit $34 a share again there is a good chance it will retreat back to support, while a break below $30 a share could welcome accelerating selling pressures.
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Disclosure: No positions at time of writing
Good call.