Mosaic: Fertilizer to Nourish Your Portfolio

We all need to eat. While certain areas of demand may have softened, the world still needs food to feed livestock and people. Fertilizer and other products are no doubt necessary. This particular sector may have been overdone on the downside and the opportunity for growth still remains.

As we said in Monday's article, finding anything that has not participated in the recent weakness is difficult, but it is certainly making it easy to identify which ideas may lead the next rally. It's really a simple concept, but one that has historically been very accurate and profitable.

If the market is going down and a stock isn't, that's relative strength and relative leaders hold better on the way down and tend to lead on the way up. These stocks are already under accumulation prior to the rally or bottom in the indices.

All the major indices have violated the November 2008 lows and have now retraced 10 years worth of upside progress. However, there are stocks and sectors that have not made new lows or are even close to new lows, which is intriguing.

The individual stocks in these sectors are not only declining at a slower rate, they actually have made minor progress against the backdrop of declining prices. These stocks are the first to bounce back after a day of weakness and they move up more than the indices from a percentage standpoint when they do rally.

One area showing such price action is the agriculture chemical stocks, which have also performed well and are forming potential bases. This price action is constructive and suggests higher prices. These stocks have not been immune to the decline -- in fact, they were hit hard in October when the liquidation selling got into full swing. Since then, they have been slowly clawing their way back and moving higher.

One we like in the space is Mosaic (MOS - commentary - Cramer's Take) a producer of agricultural chemicals that has formed a basing process between the $30 and $40 area. An attempt to break above the upper end of the trading range in early February did not hold, but the subsequent pullback has been orderly and the stock is for the most part holding the $38 to $40 level. This suggests the old resistance at $40 is now acting as new support and should contain weakness to that level.

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At the time of publication, John Hughes and Scott Maragioglio had no positions in the stocks mentioned. Hughes and Maragioglio co-founded Epiphany Equity Research, which has developed and utilizes proprietary tools to identify and track liquidity changes in the market indices and sectors. Hughes advises numerous asset managers, hedge funds and institutions managing in excess of $30 billion. Maragioglio is a member of the market technicians association (MTA) as well as The American Association of Professional Technical Analysts (AAPTA) and holds a Chartered Market Technician (CMT) designation. Maragioglio has also served on the board of directors of the AAPTA.