TOP in POT

POT (largest potash and nitrogen fertilizer producer in the world) has seen a dramatic rally during the past year, which has recently gone parabolic. The cultivation of corn is the largest use of potash fertilizer, and POT has benefited from a dramatic increase in the demand for corn, not only from rising global demand, but also from the ethanol craze that began a couple years ago. But corn-based ethanol is probably one of the worst policy decisions made by the US government, and I expect the ethanol craze to quickly disappear as more and more people realize its detrimental impact on sky-rocketing grain prices. There is significant downside risk to POT if there is a reversal in the government's policy on ethanol. The rising price in natural gas may also start to hurt POT's profit margins with respect to its production of nitrogen fertilizer. Moreover, there seems to be some more correction left in the commodities complex, which will add more selling pressure. Technically, it's hard to ignore the RSI divergence and the massive weekly doji that formed last week. A big down bar this week could very well signal a TOP in POT.



Jim is predicting a correction in POT that is similar to that of FXI, which had also gone parabolic before correcting by over 45%.