Mosaic (MOS) caught a bid yesterday, rallying strongly on the news of a potential tie up between rivals Potash Corp. (POT) and Agrium (AGU) . If we put aside any thought of this merger and try to just look at the charts and indicators of MOS, we prefer the long side.
In this daily chart of MOS, above, we can see a sideways trading range, with higher lows since January and equal highs since March. Rallies have stalled out around $30 for the past six months, but yesterday prices surged higher and settled at the new high-close for the move up, with a strong increase in volume.
During this sideways trading pattern, the On-Balance-Volume (OBV) line has been moving irregularly higher, but still confirming the price action. Prices are above the rising, 50-day moving average line and above the still-declining, 200-day line. We might see a bullish golden cross of the 50-day and 200-day averages in the near future, if the current rally extends further. The Moving Average Convergence Divergence (MACD) is in bullish territory above the zero line.
In this three-year weekly chart of MOS, above, we can see that the stock traded sideways for 2014 and half of 2015. In the latter half of 2015, prices were pretty much cut in half by the time the low was reached in early 2016. We can see that prices eventually stabilized, and have firmed above the 40-week moving average line. The average line looks like it has begun to flatten out. The weekly OBV line is neutral this year after a peak and downtrend for 2015. The MACD oscillator is almost back to the zero line for an outright go-long signal.
Bottom line: MOS was working on a bottom formation for several months before Tuesday's upside surge. I would trade MOS from the long side, risking a close below $27. The $35 to $36 area is our upside price target.