The Prudent Investing Model portfolio has profits of over 23% and the Aggressive Investing Model portfolio currently has profits of over 13%. 

The Prudent Portfolio has just 1 stock pick position remaining and the Aggressive Portfolio has 2 stock pick positions remaining.

Click here to review the portfolio investing and trading results and the stock picks remaining after the mid-week stop order adjustment.

Subscribers who acted on that market timing alert have sat on the sidelines happily avoiding a relatively fast draw-down in their investment portfolio over the last few trading days.

Economic news that drove stock prices this week was continuing dismal sales of Existing Home Sales, falling 1.9% in April to a seasonally adjusted rate of 4.89 million units.  Crude oil prices continued their unrelenting climb to a record high of $135 a barrel before falling back to the screaming deal of $131.85.  Further proof that oil rich countries and big oil companies have figured out that they can charge ANY price they want and sales will not decrease significantly.  Jobless claims fell 9,000 last week to 365,000, the lowest level in a month.

Lets take a look at the stock charts to see how this stock price break developed and what to expect from here.  Knowing what is likely to happen in the short term can certainly help in your investing strategy, whether you hold stock picks from our weekly stock pick list or your own stock picking strategy.

Here is the daily stock chart of the Wilshire 5000.

Technical analysis of this bullish trend over the last few weeks revealed a high possibility of a sharp stock price reversal.

I discussed in last weeks stock market analysis that increases in stock prices were losing the battle against some rather strong trading resistance levels.

Prior to the day that I sent out the trading alert, the stock market broad index created a chart pattern known as a Shooting Star as you can clearly see in the stock chart above.

The Shooting Star is a bearish reversal chart pattern that forms after an advance and in the star position, hence its name. A Shooting Star can mark a potential trend reversal or resistance level. The chart pattern forms when stock prices gap higher on the open, advance during the session and close well off their highs.

The resulting daily chart pattern has a long upper shadow and small black or white body. After a large price advance (the upper shadow), the ability of the bears to force stock prices down raises the yellow flag. To indicate a substantial reversal, the upper shadow should relatively long and at least 2 times the length of the body.

Although the chart pattern is not a perfect Shooting Star, the fact that this ominous chart pattern was made at the resistance level of the 200 day moving average was a significant concern.

Bearish confirmation is required after the Shooting Star chart pattern and can take the form of a gap down or long black candlestick on heavy volume.  The chart pattern confirmation was clearly evident on the following trading days - although trading volume did not increase significantly.

Adding bearish overtones to the technical analysis of this trading session was the proximity of prices to the support level of the lower channel, the midpoint of the Bollinger band, and the location of Fibonacci retracement levels (not shown on this chart). 

In addition, other technical stock market indicators were weakening significantly.  For example the Stochastics, the MACD, the RSI and the ADX were all pointing to lower stock prices in the near future.

Lets take a look at the weekly chart for confirmation of the technical analysis of the daily chart pattern.

Besides the weakening technical analysis in the stock market indicators, stock prices during the week formed a bearish engulfing chart pattern.  A strong indicator of stock price weakness to come in the weeks ahead.

Also, as I’ve discussed in previous columns, stock prices and trading volume are the most important tool for technical analysis and they didn’t fail us here either.  As the weeks passed with stock prices increasing on decreasing volume - it became clear that something had to give - we were living on borrowed time regarding this stock market trend.

Further, clearly evident in the weekly stock chart is the formation of a rising wedge chart pattern.

The rising wedge can be one of the most difficult chart patterns to accurately recognize and trade. While it is a consolidation formation, the loss of upside momentum on each successive stock price high gives the pattern its bearish bias.

However, the series of higher highs and higher lows keeps the trend inherently bullish. The final break of support indicates that the forces of supply have finally won out and lower stock prices are likely.

So what should we be doing from here.?

First - It is likely that stock prices will experience a bounce from where they are today back up to the middle of the Bollinger band - or around 14,150 or so on the Wilshire 5000.  If you are looking to sell your holdings or keep the  profits you may have earned you might want to sell at the top of any bounce that occurs.

Second - the stock picks in the model portfolios are almost all sold based on the same investing strategy I emailed to subscribers in the mid-week profit keeper alert. 

No more investment will take place, even in the best stock picks until this stock market action settles down into an identifiable market trend.  This may take several weeks and we’ll keep the portfolios invested in cash until a tradeable market trend develops again.

Subscribers and non-subscribers can click here to view the model portfolio holdings and stock picks.

As the author and owner of this article, you have my permission to publish these postings & articles electronically or on your own Web site, free of charge as long as the following by-line and functional Internet link is included in its entirety.

Written by Geoff Green, at http://profitable-investing.com/ Copyright 2008.

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Since that time CLF has been a top stock pick and trading in this stock has yielded an explosive profit.

But is this stock pick ready for sale or should you hold for more profit?

If you had been following our suggested trading strategy you would likely have sold this stock at a profit of 30% within a few weeks.  Common to many top stock picks there is the possibility that they will go on to further new highs after you sell and take your profit.

However, keep in mind that technical analysis of this stock market still shows that we are in a bullish rally in a longer term bearish trend so our trading strategy is to capture profits when we have them and cut any losses quickly.

Let’s take a look at CLF business description:

Cleveland-Cliff, (CLF) Cleveland-Cliffs, Inc. engages in the production and sale of iron ore pellets to integrated steel companies in North America and Australia. It provides iron ore pellets, including standard, fluxed, and high manganese, which are used in blast furnaces as part of the steel-making process. The company also engages in the management and operation of six North American iron ore mines located in Michigan, Minnesota, and eastern Canada. Cleveland-Cliffs was founded in 1847 and is headquartered in Cleveland, Ohio.

Our proprietary analysis shows that this stock has a current value of approximately $155 per share.  Because the stock is currently trading for less than $100 it has the potential to stay on the best stock pick list for some time to come.

It has a forecast earnings growth rate of 33% a year and a forecasted EPS of almost $7 a share, both of which are excellent characteristics for a top stock.
 
Let’s take a look at the stock chart and see what the technical analysis can show us:

As you can see from the above stock chart of CLF, it broke out from a basing chart pattern in early April, coinciding with the recommendation to go long in this rally.

Since the breakout from that chart pattern it has mostly hugged the upper Bollinger band with the exception of a small pullback in early May.  That pullback created another trading opportunity when the stock broke out of the chart pattern on huge volume.

Price and volume action of a stock is the most important component of technical analysis and it didn’t fail us here.

The Stochastics, MACD and RSI are looking a little over-sold but remember that these technical analysis indicators can be oversold for a longer time during bullish runs of hot stocks.

So should you be selling this stock pick now or hold on for more profit?

CLF may indeed have some more profit potential left but you may want to consider taking some profits off the table and protecting the remainder with a 5% trailing stop.

If you end up selling CLF, replace it with another stock from the best stock list, especially when you see breakouts to new highs on increasing volume.

As the author and owner of this article, you have my permission to publish these postings & articles electronically or on your own Web site, free of charge as long as the following by-line and functional Internet link is included in its entirety.

Written by Geoff Green, at http://profitable-investing.com Copyright 2008.
 

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The stock market turned in an excellent performance this week by rising for 5 days in a row.  If you are day trading you probably had a profitable week.

Nevertheless, even though many of the technical analysis indicators are gaining strength, continuing bad economic news will keep us cautious but not out of the market.  This weeks stock trading system recommendations included a tightening of stop order recommendations to help protect and keep investing profits.

Current market news this week included US consumers paying 3.9% more this April than they did last April.   This follows an annual reading of 4% in March.  The US Government continues to claim that “core inflation” fell to 2.3% in April.  Capacity Utilization dropped below 80% to 79.7%, the lowest level reported so far during this downturn.

Soaring gasoline prices and a sluggish economy caused consumers to cut back creating a drop in Retail sales of 2.0%.  Not to be left out, the National Association of Realtors reports that single-family home prices dropped 7.7% in the first quarter of 2008.  Read up on what the Wall Street Journal thinks about the Real Estate market here.

I am a firm believer that you’ll never go broke taking investment profits to the bank and after this stock market analysis I want to protect my profits and protect against losses.   So for now the stock recommendations include a stop order modification to a 20% profit and 10% loss instead of the recent 30% profit and 10% loss.

You can examine both model portfolios for their stock recommendations, best stock picks, and profit year to date here.  The Prudent Portfolio currently shows a profit of 22.61% and the Aggressive Portfolio shows a profit of 16.59% so far during this market trend cycle.

Let’s take a look at the daily stock chart of the Wilshire 5000.  For beginner readers I use the Wilshire 5000 stock market index for my analysis because it is the broadest real-time stock market index available. 

When performing stock market trend analysis it is best to include as many stock prices as you can.  Using the Dow Jones 30 or even the S&P 500 can blur the results of any technical analysis you perform because those stock indexes don’t include enough stock prices to ensure an accurate market trend analysis.

You can see quite clearly from the stock chart above that the stock market trend continues to be up with the daily stock prices climbing the lower channel trend line.

Many technical analysis indicators are gathering strength as stock prices continue their upward trend.  The MACD indicator is once again gathering strength and appears to be poised to make a new high in conjunction with a new high in stock prices.

The stochastic indicator is entering an overbought situation, however, the stochastic indicator can remain in an overbought condition as stock prices continue to move up.

On the cautionary side of this stock market trend analysis is the fact that although stock prices continued their bullish move this week, stock prices have yet to reach the middle channel trend line drawn on the stock chart above.  In addition, stock prices and the current up-trend might be ready to flounder in the vicinity of the 200 day Moving Average.

As evidence of continued stock price strength I would like to see stock prices reach the middle channel trend line by following the upper Bollinger band line upwards, and break through the 200 day moving average.

Let’s take a look at the weekly Wilshire 5000 stock chart to verify the trend analysis of the daily stock chart.

A technical analysis of the weekly stock chart in some ways points to the same caution signals detected on the daily stock chart.

Stock price action was clearly in an up-trend this week although the trading volume was not as robust as I’d like to see.  I’d be way more bullish on the stock market overall if the trading volume was increasing as stock prices moved up.

The fact that stock prices have almost reached a descending upper Bollinger band points to some rough trading days ahead.

Other indicators also point to a cautious analysis; the stochastic indicator is in the overbought territory and the MACD although still strong and moving up could start to weaken in the short term.  However, the RSI indicator and the ADX appear to be supporting the up-trend analysis conclusion.

The bottom line?  Although this weeks stock market trend analysis shows some conflicting signals, stock price action is always king.  As long as stock prices continue their upward trend, we’ll continue to hold our best stock picks but we’ll be willing to sell on a reasonable profit and cover any losses quickly.

 To review our best stock picks strategy please visit out best stock picks page here.

If you would like to subscribe please enter your contact information in the right margin.

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Weaker than expected economic data tends to send the stock market down, bond prices up and interest rates down, while positive data points to a higher stock market, lower bond prices and rising loan rates.

Economic Calendar for the Week of May 12 – May 16

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These gains were created just by following our stock market timing rules in conjunction with our best stock picks list. 

For the most part these portfolios run by themselves with less than 30 minutes a week effort to adjust stop orders.

The Prudent Portfolio had 79% winning positions, with 14 total trades this portfolio had 11 winning and 3 losing trades. 

The Aggressive Portfolio had 75% winning positions, with 13 total trades this portfolio had 11 winning and 2 losing trades.

Both model portfolios are now 100% cash and will remain in cash until our market trend analysis shows that it is once again safe to purchase stocks long.

The recent stock market up-trend that started in early April has been getting weaker over the last few weeks, finally showing a real probability of dropping through the lower up-trending channel that started in mid-March.

This renewed bearish action is to be expected based on a variety of factors.  Let’s take a look at the Wilshire 5000 stock market index to see what we can expect in the future.

 Looking at the daily chart above, several bearish observations can be made.

Stock prices handily rose above the 50 day moving average in a strong uptrend that started at the March lows which is a bullish move by itself but prices have hit a lot of resistance recently.  Strong resistance at the 14,250 level is just about the same level as the 200 day moving average. 

Trading volume has been decreasing which shows a lack of conviction by the big money players - and we all know it’s the big money players that drive stock market trends.

The 200 day moving average is a strong indicator of stock market trends.  If prices are below the 200 day moving average you can generally assume that prices will continue in a downtrend.  Adding more weight to the down-trend conclusion is that the 50 day moving average is also below the 200 day moving average.

In addition to the moving average analysis, price rallies quite clearly were getting weaker since mid-April.  You can see on the chart that the up-trend in prices failed to reach the upper trend line and are now resting on the lower trend line with other technicals getting weaker.

The Stochastics, MACD, RSI and the ADX indicators are all foreshadowing price weakness at least in the short term. 

If this next move truly plays out to be bearish - and I think the odds favor a bearish move - stock prices could easily move to the lower Bollinger band at around 13,500 on the Wilshire 5000 index.  This type of move could trigger more bearish action that could test the March lows at around 12,750.

Lets take a look at the weekly chart.

Market analysis on the weekly chart is pointing to the same bearish market trend conclusions. 

This last weeks stock market action shows up on the chart as a bearish engulfing action. 

This type of chart pattern is a strong indicator that more bearish action is to be expected - at least in the short term.

Although the indicators on the weekly chart are in bullish positions they are getting weaker and point to a general weakening of prices.

Besides price and volume action I will watch the indicators for confirmation of a renewed bearish move.  I expect the Stochastics indicator to cross the trigger line and drop below the 80 level and the MACD to accelerate it’s slowing and start to reverse.

The RSI is struggling to get above 50 - a clear indicator that the bearish environment will continue at some point.

Our model portfolios will remain in cash until I see how this battle between the bulls and the bears plays out.
 
When the battle is over and I can identify a profitable investing trend we’ll start investing again in our best stock picks list.

If you would like to be notified when it is safe to own stocks again, please enter your contact information in the right margin.

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The model portfolios are purely mechanical,  meaning that once the stock market timing analysis has indicated that it is safe to invest in stocks, the top stocks from the best stock list are purchased and the appropriate stop parameters are used.  If any of the positions are sold for whatever reason, the next stock in line on the best stock picks list is purchased.  The model portfolio is operated in this manner until the stock market timing analysis indicates the end of the bullish cycle.

The model portfolios - and you can too - do exceptionally well just using this purely mechanical strategy.

You can greatly increase the profitability of your investing by using 2 extra steps that are easy to perform.

Step 1 - Incrementally Invest In New Positions From The Best Stock Picks

When I decide to take a position I invest only 50% of the funds allocated to that position.  You’ll find out why this is important in step 2. 

I then watch that position closely - in the beginning I look at the chart or closing price on a daily basis.

The next few days are critical to make money using market timing. 

If I am right on this position the stock should be increasing in value - especially the day of and the day after I took on the investment.  If it didn’t go up the day after the initial investment then a big warning sign goes off and I’ll adjust my stops tighter or sell the stock at market prices if it continues to trend down in price.

This is a difficult step for most people - you have to be able to admit that you have made a mistake and get out of a losing investment as soon as you can. 

You have to face the facts - and the facts are that you thought you had timed the investment right and the stock was going to go up but it didn’t.

Don’t wait and hope that things will turnaround for the better.  Big losses start with small losses and this investment need to perform properly or you should get rid of it.  Run your investment portfolio like a business, underperforming employees have got to go!

If the stock goes up then I’ll invest the remaining 50% of my allocated funds as the stock trend strengthens.

Just this step alone will go a long way to improving the performance of your investing activities.

Step 2 - Cull Your Investment Portfolio on a Regular Basis

Culling your portfolio is a strategy that will continually jettison the weak stocks and increase your investment in up-trending stocks.

The ideal number of stocks to own in your portfolio should be 10 stocks.  Sometimes I’ll stretch this number to 14 or 15 in my portfolio but I always strive for 10.

In strongly up-trending stock markets you’ll discover lots of stocks that are also trending up - especially if you review our weekly list of best stock picks.

If you follow a maximum holding rule of 10 stocks you’ll find that 2 to 3 of those stocks will be real winners, 2 to 3 will be losers, and the remaining 4 to 6 stocks will meander about, perhaps increase in price only weakly and eventually fall out of their up-trends.

So now you have a dilemma, if you have 10 stocks in your portfolio and you see a great investment opportunity developing in one of our best stock picks, what are you going to do?

Guess what, if you have a limit to the number of stocks you can hold in your portfolio, you are going to have to sell a position to make room for a new investment.  If you are culling your portfolio you’ll quickly recognize which of the losing positions to jettison to make room for a stock in a better trend.

Then if your new position performs correctly you’ll be able to invest your total fund allocation into that stock.

Following these two simple steps will ensure that you put most of your investing funds into high performance stocks that are going up in price. 

Always remember this saying - focus on the best and dump the rest - your investing results are bound to improve dramatically!

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Weaker than expected economic data tends to drive stock prices down, bond prices up and interest rates down, while positive data points to increasing stock prices, lower bond prices and rising loan rates.

Economic Calendar for the Week of May 5 – May 9

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Investors continued to rotate out of leading industry groups and leading stocks and into beaten down groups & stocks as another interest rate cut and the lure of stimulus spending increases hopes for a stronger economy. 

This investor rotation has caused both the model investing portfolios to pull back slightly from last weeks gains.

The Prudent investing model portfolio currently has a gain of 10.36% with the Aggressive Investing portfolio shows a gain of 9.94% since the beginning of April.  Even though rotation out of leading stocks has hurt the investing return of these portfolios our strategy of holding strong stocks from our up-trending best stock picks list will not change.

In the economic news this week…

As part of the continuing quest to aid the economy, the U.S. Federal Reserve lowered its key interest rate, as expected, by a quarter point to 2%. Gross Domestic Product grew by a weak 0.6% in the first quarter of 2008 as the housing and credit problems are forcing both people and businesses to hunker down.

The Conference Board’s Consumer Confidence Index fell again in April to 62.3, down from March’s 65.9 reading and February’s 76.4 reading. While this reading was better-than-expected, the index is still at its weakest point since March 2003 and is the eighth decline in the last nine months.

The Standard & Poor’s/Case-Shiller Home Price Index fell by 12.7% year-over-year in February, the steepest decline since its inception in 2001. Nationwide reported that the number of homes facing foreclosure in the first three months of 2008 was 649,917, up 112% from the same quarter last year.  Home mortgage interest rates have remained volatile but drifted slowly downwards for the week.

Stock market action for the week was fairly quiet for the first 3 trading days following the gains of the previous week.  Thursday saw a huge jump in stock prices which helped keep the up-trend channel in place.  Friday’s trading was mostly lacking any discernible trend which would be expected as the stock market digested it’s recent gains.

As you can see from the following chart of the Wilshire 5000 stock market index, stock prices have traced out an up-trending channel that has closely followed the bullish upper Bollinger band upwards.

Stock prices have trended their way firmly upwards since mid March and have moved into the broad area of resistance shown by the yellow band in the above chart.

In addition to increasing resistance to further gains, prices are now approaching the resistance of the 200 day moving average.  Although stock prices are firmly above the 50 day moving average, this recent up-trend should still be considered a bullish bounce in a longer term bearish market until prices are firmly above the 200 day moving average and the 50 day MA has crossed the 200 day. 

At that point trend analysis would indicate a transition back to a bullish market.  However, trend analysis is keeping us invested in this market until real price weakness surfaces.

The MACD and the RSI indicators are also supporting this bullish trend analysis and the ADX lines are widening and showing an increasing potential for an even stronger up-trend.

Let’s take a look at the weekly chart and see if the longer term supports the daily trend analysis.

The weekly chart also supports the daily analysis that this bullish up-trend has some strength left. 

Our last bullish market timing call will remain in place until there is increasing evidence that this bounce is coming to an end.  If that happens mid-week I’ll send an email alert to tighten up stops and to take or protect profits.

If you are wondering if there is still time to take advantage of this trend analysis and jump into the market you may want to take a look at our weekly list of best stock picks and take initial positions in stocks that have pulled back from their highs.  Our weekly list of best stocks represent undervalued stocks that are in up-trends and are growing in size and earnings.

If you are not a subscriber you can obtain a free trial to our market trend analysis information, market timing data and best stock picks by entering your contact information in the form on the right.

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Does BAC really think they can get back on the growth path by purchasing a failing financial institution?  Wouldn’t it be more efficient, less risky, and less costly to expand the mortgage loan market through organic growth?

One would think so, especially since BAC’s EPS is 85% below expectations at a paltry nickel a share - no wonder the stock price is in a down-trend!

Here is a summary of BAC’s business:

Bank of America, (BAC) Bank of America Corporation, a financial holding company, provides banking and nonbanking financial services in the United States and internationally. It operates through three segments: Global Consumer and Small Business Banking, Global Corporate and Investment Banking, and Global Wealth and Investment Management. The Global Consumer and Small Business Banking segment offers savings accounts, money market savings accounts, certificate of deposits, individual retirement accounts, and regular and interest-checking accounts; consumer cards, business cards, debit cards, international cards, and merchant services; mortgage products for home purchase and refinancing needs; insurance services; and lines of credit and home equity loans. The Global Corporate and Investment Banking segment provides commercial and corporate bank loans, indirect consumer loans, commitment facilities, real estate lending products, and leasing and asset-based lending products for banking clients, middle market commercial clients, multinational corporate clients, public and private developers, homebuilders, and commercial real estate firms; advisory services, financing, and related products for institutional investor clients in support of their investing and trading activities; debt and equity underwriting, merger-related advisory services, and risk management solutions; and treasury management, trade finance, foreign exchange, short-term credit facilities, and short-term investing options for correspondent banks, commercial real estate firms, and governments. The Global Wealth and Investment Management segment offers wealth management and retail brokerage services, as well as asset management services, including mutual funds, liquidity strategies, and separate accounts. As of May 2, 2007, the company operated approximately 5,700 retail banking offices and 17,000 automated teller machines. Bank of America Corporation was founded in 1874 and is headquartered in Charlotte, North Carolina.

BAC’s growth rate has shrunk from about 16% a year ago to a negative growth rate of -5% today.  Is this a stock that you should own?

As always it depends on your investing strategy and your market timing analysis. 

However, I’m never a supporter of holding stocks that are in a down-trend, regardless of your time horizon.  You have to ask yourself why you would want to own a stock that is trending down in price.  Would it be because you think the price will eventually reverse and start going back up?

A lot of Bear Sterns stock investors tried to play that game and look at the situation they are in now.

A better investing strategy is to use market timing to get into the stock when earnings and growth has improved and it has started its up-trend - if it ever does start an up-trend.  It’s much safer then trying to guess where the bottom is.

Let’s take a look at the stock chart for BAC on a weekly basis over the last 3 years.

As you can see by the stock chart and BAC is definitely in a down-trend, and just about every market indicator is pointing to lower prices ahead.

The Bollinger bands are all pointing down as are the moving averages.

The stochastic indicator has been tracing lower highs and lower lows since the overall stock market down-trend started in November of 2007.

The MACD has also been tracing lower highs and lower lows since November.  Although the MACD is starting to show a little strength, the price and volume action of BAC greatly overshadows any indicator strength at this time.

BAC stock price has traced a symmetrical triangle centered around the lows created around the end of 2006 and the beginning of 2007.  A symmetrical triangle at this level is likely to be a consolidation before resumption of the down-trend that started in November.

If this is the case and BAC drops out of the symmetrical triangle - especially on increasing volume - you could expect prices to drop to the $26 level or so before finding a real meaningful bottom.

On the other hand, if BAC moves up through the top of the symmetrical triangle - again, especially on increasing volume - you might expect a resumption of an up-trend.

In my opinion a drop through the lower boundary is more likely, especially with the deep financial problems that BAC is inheriting from Countrywide.

The problems at Countrywide that will not only consume BAC’s precious financial resources but will defocus attention from its core business.  BAC is unlikely to make it to our weekly list of best stock picks for along time.

This is a takeover that is going to affect BAC negatively for a long time.

On the other hand - perhaps the takeover was orchestrated over a weekend on the QT in the same fashion that the Bear Sterns takeover by JP Morgan was arranged?

What do you think?  I’d be interested in your opinion, please use the comments link below.

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Potash Corp - symbol POT has been a regular member of our best stock picks for some time now and no wonder, POT currently boasts a yearly growth rate of 30%.  POTs growth rate slowed a little in 2006 to 18% and prior to 2006 varied between 20% to 36%.  POTs EPS turned from negative to positive in early 2005 and has skyrocketed since then to an EPS of approximately $7.

Given the business that it’s in - fertilizers - it may continue to grow from here.  But has POTs stock price and up-trend got a little ahead of itself?

Let’s take a look at the business itself:

Potash Corp, (POT) Potash Corporation of Saskatchewan, Inc. (PotashCorp) engages in the production and sale of fertilizers, and related industrial and feed products. The company manufactures and sells solid and liquid phosphate fertilizers; animal feed supplements; and industrial acid, which is used in food products and industrial processes. It produces potash from six mines in Saskatchewan and one mine in New Brunswick. PotashCorp also produces nitrogen fertilizers, as well as nitrogen feed and industrial products, including ammonia, urea, nitrogen solutions, ammonium nitrate, and nitric acid. It has nitrogen facilities in Georgia, Louisiana, Ohio, and Trinidad. The company sells its products to retailers, cooperatives, and distributors that provide storage and application services to farmers in North America. Potash Corp was founded in 1953 and is based in Saskatoon, Canada.

So how do you decide if an investment in POT is right for your portfolio.  It really depends on your investing strategy.  If you are more of a buy and hold investor then watching the weekly chart may work best for you.  If you are a trader and look to take more short term profits then watching the daily chart is probably the best idea. 

The daily chart is certainly showing some profit taking right now, but the up-trend still appears to be in place, at least for the time being.

Although both charts show some profit taking, let’s examine each chart and see how they can be used to your advantage.

Looking at the daily chart of POT, you can clearly see that the optimal time for traders to sell POT has passed a week ago.  How would you have known to sell?

Clearly, stock prices cannot continue in a skyrocketing up-trend indefinitely.  After almost a month of hugging the upper Bollinger band on the way up, astute investors would have figured some profit-taking was inevitable. 

Investors didn’t have to be that astute to see the huge trading volume on 4/24/2008 on a down day to know that something was wrong.  Even if that day was overlooked there were several more opportunities to sell and capture some profits from this up-trend.
 

So is this up-trend for this best stock pick over?  Time will tell, but without much of a doubt price and volume action along with the indicators are pointing towards some more movement down to the closest support level.

However, because of the huge up-trend that POT was on, there isn’t much support until prices get down to about $165 to $170 - which just happens to be right round the 50 day moving average.  I’ll think POT will find support at this level.

Whether the up-trend resumes after that or not remains to be seen.

Let’s take a look at the weekly chart and see what we can deduce about the up-trend from a longer time perspective.

On the weekly chart the top looks a little different.  Instead of the huge volume of late April showing up as a reversal day, it shows up as little price progress.

This sort of action - huge volume with little price progress - is a clear sign that a top is being formed.  It remains to be seen if this is an intermediate top that will be followed by a consolidation period and a resumption of the up-trend, or if this is the end of the up-trend for a longer period of time.

The weekly chart also shows the price support level for POT at about the same price as on the daily chart - at about $165 to $170.

So if you are interested in owning shares in this fine company, what should you be watching for?

Well both charts are showing a high potential for some price reversal down to the $165 to $170 level.  Investors should wait until this price level demonstrates the proper amount of support before committing funds to this stock.

Once POT has created a foundation around this price level, it will likely leave clues about whether or not it will resume it’s uptrend.  Of course the overall market environment will help POT make up it’s mind about what it will do after reaching the support level.

Will POT make it back up to be a leader on our weekly best stock picks list?  Right now it is way down the list based on its technical performance.  Time will tell if it makes it back on as a consistent leader.

But if POT isn’t on the best stock pick list, you can rest assured that another fine company that is in an up-trend will take its place.

If you would like a free trial with access to our weekly best stock picks list just enter your contact information on the form located in the right margin of this page.

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