Shares of specialty chemical company Mosaic (MOS) - Get Report have been experiencing a period of price range contraction that often precedes a volatile move, and technical indications suggest it could be a sharp jump to the upside.
The stock has been in a steady long-term decline and is down 28% year-to-date, but over the last month there has been an attempt at consolidation, just above the October low and just below resistance in the $32.70 area. This attempt at stabilization has compacted price action.
The red Bollinger bands, a measure of standard deviation around price, have moved within the Keltner channels, a measure of standard deviation around average true range. This is one indication of a potential volatility squeeze, and the accompanying technical indications are suggesting that it will be followed by a break above nearby resistance. The stochastics oscillator has made a bullish crossover and moved out of an oversold condition. Daily moving average convergence/divergence is overlaid on a weekly histogram and is making a positive crossover against an improving longer term backdrop. Accumulation/distribution has turned above its 21-period signal average, and the graph at the bottom of the chart shows that volume on Monday surged to nearly twice the 50-day moving average of volume. The stock is experiencing a volatility squeeze under a clearly defined resistance level, and the momentum indicators are pointing higher, supported by an increase in volume and positive money flow.
Mosaic is a short-term buy after an upper candle close above resistance using a trailing percentage stop. The strategy behind this trade is to take a quick profit or a quick loss.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.