Many Commodity Stocks Are Still Short Candidates

NO, NO, and NO! No long positions! In fact, most of these names are still short candidates for the long-term. Anyone hoping for some kind of nice big bounce will be disappointed. Fundamentals? Oh yea, look where they took you now. Technicals display price action, and price action is the consensus estimate of market participants, and I’m sure they know all the fundamentals they could possibly know. Sudden and dramatic changes in sentiment occur for any number of reasons, and the important thing is to react when that occurs, regardless of personal beliefs.

I love it when these dude take long positions because these stocks are cheap. They’ve fallen 25-50% further and I’m the guy on the other side shorting them. Ignoring technicals won’t do you any good.

Do these names have a long ways to go? You bet. There’s too much excess “greed” money in these names and there are still people holding. Many of these names are dominated by hedge funds and as more funds blow up and have to force liquidate, you’ll notice those intra-day ‘blips’ on the charts. That’s a fund dumping a large position.

Do I recommend shorting? Only on a pullback. Do not chase these stocks as they do tend to have sharp pullbacks into resistance. The only names I would short here are Potash (POT), AK Steel (AKS), and Mosaic (MOS) because of the possible amount of future decline.

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Comment by John

2008-10-02 14:38:12

STILL NO!

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