Potash (POT) has been out of favor on the charts for five years, but some early accumulation may suggest that it may finally be poised for a new uptrend.
In this daily chart of POT, above, we can see a bullish divergence in December and January as prices made lower lows, but the momentum study made a higher low. The higher low means that the rate of decline slowed and this can foreshadow an uptrend. The On-Balance Volume (OBV) line started to move up in early January and we have since crossed above the 50-day simple moving average. Inch by inch that is how bottoms are often made.
The heavier than average volume of trading in January could mean that the sellers have gotten out of all their positions.
This longer-term chart, above, of POT is not pretty. But let's just focus on the recent price action and signals. First it looks like prices have stabilized around $15. Second, the OBV line is inching up a little suggesting new accumulation as the volume is heavier on weeks when POT closes higher. In the lower panel, the MACD oscillator has crossed from below the zero line, which is a cover-shorts signal.
We needed to turn to this very-long-term chart, above, to see the five-year decline for POT and where chart support might exist. POT has already broken its 2009 lows, so the next level is the highs of early 2006. The $15 level appears to be between the 2009 low and the 2006 highs and we can work with that for now.
What's the strategy? After a five-year decline it will take a long time for the trend to reverse. Longer-term investors could consider a small starter position in POT, risking a new low close. There is no rush or need to get more aggressive until we see more of a base pattern. Have patience.