Another Way Into Monsanto

 | Jul 28, 2013 | 5:00 PM EDT  | Comments
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In early July, I identified a Fibonacci price cluster setup in Monsanto (MON). The chart below shows what we were watching at that time.

Monsanto (MON) -- Daily I
Source: Dynamic Trader

Since then, Monsanto has rallied $8.30, though it has not hit a bigger-picture target, which I am still watching as a possibility. If you had used a trailing stop here, you would likely be out of the trade, as it has seen a rather healthy pullback since the July 23 high. Since the original trade setup zone is still intact, and the stock has not yet reached the upside target -- similar to a double-test of the old Netflix (NFLX) buy setup -- I am going to watch for a secondary entry against the original trade setup zone.

Monsanto (MON) -- Daily II
Source: Dynamic Trader

There are two areas of potential support that come in above the July 2 low. The first comes in between $99.30 and $99.67, an area that contains a 0.618 retracement back to that original low and a 1.618 extension of a prior swing. The second zone, $98.28 to $98.30, includes a 100% projection of a prior decline from the July 23 high that overlaps the 0.786 retracement back to the July 2 low.

If the share price can hold around or above one of these two zones, I am going to look for a buy retrigger using a 30-minute chart. For me, that means I need to see the eight-day exponential moving average cross back above the 34-day EMA, and for the stock to take out a prior swing high. If that occurs, I can then define my risk below the low end of the support zone.

If the rally does resume, the bigger-picture target will remain quite a ways above this market -- around $112.82. I would pay special attention to managing the trade, however, if Monsanto gets up to the next big hurdle at the $106.25-to-$106.58 area.

If these two pullback zones are violated, of course, I will back off the buy side in this one until further notice.

Remember: The way to make money with this type of analysis is: Setup plus trigger equals trade entry -- and sometimes a second chance presents itself! Let's first see if Monsanto retriggers an entry, and then trade accordingly.

For more information on trade triggers, please refer here

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