Inverted H&S on POT

MOS Short Entry @ $108

Looks like a symmetric triangle forming after the recent failed late stage breakout on this over bloated pig of a stock. Since the very late stage breakout failed I would definitely expect this symmetric triangle to break to the down side. Picking a target is tough because this stock is up so much with very little support created along the way. I think the rising 200 dma ($68) will seem fair eventually but obviously now that seems kinda greedy. MOS is almost back up to the upper end of that symmetric triangle for a safe short entry around $108. Today after the market close there was some news of a new fertilizer contract in India so there should be a good opportunity tomorrow near the open to sell MOS. Be sure to set a stop at $110 where major resistance lies.

MOS Faces a Wall of Resistance

Today Was Not Such a Good Day (unless you're Ben Bernanke)

Today Was a Good Day (but not for Eliot Spitzer)

Failed Late Stage MOS Breakout

I've blogged about failed moves here in the past and how they often lead to fast moves. When a leading stock breaks out to new highs momentum investors pile in as this is usually a successful strategy. But all trends eventually end and when that momentum turns the initial drop can be big. After a late stage breakout (or breakdown) fails to follow through new investors panic easily and long term investors decide that maybe they should lock in profits and you get a waterfall decline.

MOS appears to be rolling over with the other agricultural stocks and the commodities themselves, just look at DBA. MOS is a stock that has had a tremendous run over the last few years and could potentially fall a long, long ways. Take a look at this two year weekly chart and ask yourself if $85 is a reasonable level to drop to. This fertilizer stock is up from $20 in early 2007 to over $100 today, those are some nice profits for someone. Over the past three months (chart above) $85 has acted like support so thats going to be my initial target, but should this thing really break I could see MOS heading back down to the $50-$60 level. Watch for volume to increase as this thing rolls over (or rebounds to new highs). I'd put a stop in at the previous breakout price of $110.20. Good luck.

Disclosure: I own MOS puts.

What goes up must come down? (3 yr charts)

RIMM

PCU
FSLR
DRYS
DECK
MOS
LED ZEPPELIN

MON
POT
AAPL
GME

Disclosure: I own DRYS, FSLR & RIMM puts. Also, Led Zeppelin calls.