CMT: Check Out Fertilizer Stocks For 20% Rally

Brean Capital technical analyst Frank Longman sees 20 percent upside in the charts of fertilizer stocks Agrium Inc. (USA) AGU, CF Industries Holdings, Inc. CF and Mosaic Co MOS.

“All yield at least 3.77%, inflation break-evens have signaled that ‘deflationary death spiral’ is unlikely in Q2 and barbell approaches continue to pay off,” Longman explains.

For CF Industries, Longman believes the stock will close above $43.50 before it closes below $28.50. With the stock currently trading around $32, that trade represents 35 percent upside versus only 11.3 percent downside.

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Longman recommends a similar approach to Agrium. He sees upside to $103 in the short-term and advises a stop under $83. That setup represents more than twice as much upside as downside from the stock’s current level. He notes that patient investors might want to wait for a pullback to the $85 level before buying.

Finally, Longman recommends buying Mosaic with a stop at $24 and an upside target of $34.35.

All three fertilizer stocks have been hit hard of late, but Longman believes that the stocks have favorable short-term chart setups. Agrium is down 15.2 percent in the past year, while Mosaic and CF Industries are down 39.1 and 44.7 percent, respectively.

Disclosure: the author holds no position in the stocks mentioned.