While I believe all crops will go up over time, since the crop report [Mar 31: USDA Crop Report] we've seen divergence among the names (which I outlined above). So the ETF has been stalled. While I am unclear on the usefulness of technical moving averages on an ETF made up of 4 commodities (as opposed to an individual stock), I am clear that many speculators have entered the crop market of late and they come from the world of stocks. So they could be using technical indicators... as their influence increases in the commodity market, I'll give more credence to the fact that technical indicators might be of use. And if that is true, this is a chart that has weakened the past few days, and broke below a key support level this AM. So I'll play it safe and I'm cutting 75% of my position, down from 850 shares to 200 shares, selling in the low $38s. This takes the name from a 2.8% stake to 0.7% stake.
The ETF has been hanging around its 50 day moving average most of the past month, creating a lot of headfakes on both the up and downside. Every time it looks ready to make a substantial move, it sells off. We could just be basing for the next leg up, but that base could take months to build for all I know. For those who think this is the beginning of a larger move downward we now have the Agriculture Double Short ETN (AGA) [Apr 17: Four New Agriculture ETNs]
Again, I want to stress, I do not know how effective technical analysis is, on this ETF but for now I am going to treat it as a stock and take my position down. If we see any prolonged weakness in crop prices that could be the catalyst to cause fear and selloff in the fertilizer stocks... we shall see.
Long Powershares DB Agriculture Fund in fund; no personal position
5 comments:
Mark, I dont think its really the type of trading in the ETF/ETN's. It's more that the strength has moved between corn, wheat, and now rice, which isn't in the DBA etf.
AGA +7% now.
Interesting to see the commodities down but the related stocks ignoring it.
JJA is a more broad all in 1 commodity ETF, down sharply yet the stocks related continue to levitate :)
I think that was the great thing about fertilizer. As long as the crop required it, it was a good way to play the increase in grain prices, regardless of the type. JJA doesnt have any rice. Do you know of any way to get exposure there? I'm still bullish on DBA - the chart looks funny.. technicals really dont work too well on it, but I think the recent subsidies (aka the export restrictions, etc being done all around the world) that is just going to spike the prices higher in the next few months.
IPI is suppose to do 1.1M or so of potash (from the potashcorp presentation on their site). They also have an estimate of their 'excess capacity' - essentially nil. So I suspect they trade at a discount to guys like mos and pot. The growth will probably be from increased prices like everyone else. In that case, who do you think is the best comp?
there are no comps
MOS trades at discount to POT due to less expansion capability
AGU trades at discount to MOS due to retail arm
IPI should trade at discount to MOS due to less expansion capability but market hysterics will probably push it to a value over POT in the near term due to small float, lockup, hysteria, and the like.
I used MOS on a trailing earnings basis. I think that came out to 42 bucks a share. I would guess fair value would be a slight discount to that, so high 30's. But yeah.. no telling what kind of hype is going to go into it.
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