Agrium Patterns Predict a Return to All-Time Highs
Shares of Agrium (AGU) have formed bullish patterns on both their weekly and daily charts and look prepared to retest their all-time high made earlier in the year.
The weekly chart of the seed and fertilizer supplier shows the stock retesting a five-year uptrend line in September and October and forming a morningstar reversal pattern. This three-period pattern consists of a large down candle, followed by a narrow opening and closing range doji candle and completed by a large up candle. It represents a transition from bearishness to bullishness and often forms at key lows.
The morningstar process initially penetrated the lower end of the declining channel that the stock has been trading in this year before touching the uptrend line and bouncing back into the channel body. Moving average convergence/divergence on this timeframe is attempting a bullish crossover, and stochastics looks prepared to make another try at breaking above its centerline. Money flow as represented by the accumulation/distribution line and Chaikin money flow, however, is relatively flat.
On the daily chart, the morningstar low can be seen as the first half of a cup and handle formation, with rim line resistance in the $97.25 area. The relative strength index is tracking above its centerline, a reflection of the recent positive price momentum, and the vortex indicator a measure of trend, is making a green bullish crossover. The money flow index, a volume-weighted relative strength measure, has crossed above its centerline, but the A/D line on this timeframe, like the weekly, is also flat.
The stock has broken above the cup and handle rim line, and that pattern projects a break above channel resistance and the 200-day moving average. The target price projection from the channel breakout projects a move back up near the February all-time high. Agrium is a good risk/reward long candidate at its current level with a trailing percentage stop.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.