Monsanto Co. (NYSE: MON) provides agricultural products such as seeds and herbicides to farmers. The products help improve farmers’ productivity and hopefully better quality foods for the end-consumer.
Sector: Basic Materials. The sector doesn’t look very good, very similar to the broader market, i.e. broken charts.
Industry: Chemicals (Agricultural). The industry charts look more constructive, more in-line with the charts of Monsanto Co. (NYSE: MON) we are about to look at.
The weekly chart of Monsanto Co. (NYSE: MON) looking back to early 2009 shows a nice double bottom formation in 2010. After confirming the double bottom the stock proceeded to run higher and eventually found resistance at a down-trend line (downward sloping blue line) in late July this year. More importantly however the $62.50 area, which in 2010 served as resistance has in 2011 so far held as solid support.
On the daily chart looking back to early May 2011 note again the support level at $62.50 and downtrend resistance currently coming in just below $76. Last week the stock found resistance at the 50 day simple moving average (yellow line) but then yesterday after making a higher low had a big up-day by rallying almost 6%.
The trade I see setting up is to go long Monsanto Co. (NYSE: MON) on a daily close above $70.50, which corresponds with the 50 day simple moving average (yellow line). Stops can be placed near $68 with an initial profit target near $76. On a break above the downtrend line at $76 further profit targets need to be evaluated.