Mosaic (MOS) looks like it is dancing with fire.
Today's close along with tomorrow's early action should clear the waters as to whether this is a major breakdown or just a fake-out. The daily chart is flashing a very large head-and-shoulders pattern, with MOS losing support yesterday and seeing some small follow-through today. A tick up in volume along with any continued price drop would be a very bearish sign. At the very least, the stock has lost the support of the price channel formed during April. On the high side, a test of $43 should be in order, but if this head and shoulders gains any momentum, we could be more in line for a $37-$38 test.
The secondary technicals are of no help to the bulls. The relative strength index is pushing near oversold territory while we see the slow stochastics following through on a bearish crossover. These two demonstrate a complete lack of momentum in the stock. The Vortex Indicator has been bearish since the early March breakdown, reaffirming the bearish trend is in place. Trend, momentum and price are all firmly planted in the bearish camp as of this day. A short trade should limit risk to about $2 here, as a close over $46.75 would trigger a bullish reversal. One could sell some out-of-the-money bearish call spreads with a risk of $2 and simulate the risk of shorting here, although the upside is limited. I would be more prone to use bearish put spreads using $46 or $45 as my long leg and placing my short leg in the $40 to $42 area going out a few months.
The longer-term picture is slightly better. The inverse head-and-shoulders pattern becomes very steep and less clear, so maybe it won't have a longer-term impact. Support isn't quite broken yet as it is on the daily chart, but if it does break, then support doesn't come for another 10% on the downside. Here, we are just seeing the longer-term technicals move into bearish territory with trend and momentum breaking down before price. This doesn't help contradict the bearish nature of the daily chart.
Overall, downside feels capped around 10%, but a move lower feels much more in the cards than a reversal higher. If the RSI or Vortex Indicator can reverse on the weekly chart, then I would have a bit more optimism on the daily chart. Until we see that take hold, I would expect some additional upside in the ag space.
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