Ag Chem Stocks Galloping Upward

Dow Jones Chemical Index

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We've talked about the chemical stocks in this column before, but we thought it might be a good idea to revisit this group since the chemical stocks have been one of the best-performing sectors in the market over the last month; a fact by which most traders seem surprised. The last time we looked at this group we highlighted DuPont (DD Quote) and Lyondell (LYO Quote), which are petrochemical companies.

This time we want to focus on some of the specialty chemical names in the sector that are showing strong relative performance vs. the broader group. The chemical sector continues to see strong liquidity inflows. Breadth for the group made another new high yesterday, which confirms the recent highs in the sector price action and tells us that money continues to flow toward the group.

The strongest subgroup within the chemical sector is the agricultural chemical companies. Those stocks are hitting on three bullish themes: the farming and industrial-materials boom that is being driven by ethanol production, an increase in worldwide food consumption and the global industrial expansion. These stocks continue to hit on all cylinders.

Two of the most interesting names here are Monsanto (MON Quote) and Mosaic (MOS Quote).

Monsanto

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Monsanto is the largest name in the group, and it has two major business segments. The first is agricultural chemicals, which is centered on Roundup, the world's best-selling herbicide. The second is agricultural genomics. MON has been a leader stock in this rally and looks ready to push higher once again.

The stock has formed a bullish consolidation within the context of a long-term uptrend. MON can be bought here as traders look for a continuation of the uptrend. Use a break of the uptrend line at $63 as a stop loss.

Mosaic

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Mosaic is a similar trade. The stock has formed a bull flag continuation pattern at this level. This type of pattern suggests the stock has worked off some of the recent excesses, and it's ready to resume the uptrend. Again, use a break of the uptrend line at $35.50 as a stop loss.

Mineral Technologies

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Another interesting name in the chemical sector is Mineral Technologies (MTX Quote). Mineral Tech is a specialty chemical company that produces inorganic chemical and materials.

This name has an excellent chart in place, and the stock looks like it wants to continue trending higher. MTX has retested the uptrend line and is now forming a bullish consolidation pattern. Look for the stock to break out over resistance and confirm the uptrend. These names are on the offensive, and judging by the sector action and the prevalence of bullish individual stock charts, it looks like the group still has some legs to it.