Saturday, September 13, 2008

Potash Thoughts

Canadian Dollars asked for my thoughts about Potash after its nice rebound the past few days so without further adieu, here are my opinions on the stock.

I think it is a great stock to own yet the volatility (especially of late) also makes it a great shorter-term trading play so if you have the ability to trade in and out of it on a frequent basis, go right ahead and give it a try if you'd like. I know I would if I had the time!

Looking at the chart, POT is still within its current downtrend.

Depending on how you draw the upper resistance line, you can say that it's close to breaking that trend. That being said, I personally would wait for one of the following to occur before entering into a position:

  1. It closes above the downtrend line and/or fills the gap (shown by the green lines).
  2. Retests and finds support at its recent lows.
  3. Bounces of the bottom line of the downtrend.
Waiting for POT to hit one of these three price targets would be the lower-risk time to invest. One of my goals going forward is to start acting on low-risk trading opportunities or at least considering the risk/reward ratio when entering trades. I guess we'll see how that goes in future trades.

I hope that helps you Canadian Dollars!

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