Potash Corp. /Saskatchewan (USA) (NYSE: POT) Must Stay Above $37.60 For The Bulls

Denver, CO, 07/26/2013 (Avauncer.com) – Potash Corp. /Saskatchewan (USA) (NYSE:POT) (Closed: $37.44, Down: 1.32%) opened sharply lower as its result impact with a volume of 17.5 million against the average volume of 5 million but recovered a lot of its lost ground by the close. But the stock still closed below a major trendline.

All the price action of the last 5 years is stuck between the high and low made in 2008. The price retraced about 70% of its entire fall on its subsequent bounce and reached            $64 by 2011. The next bear market is still going on in the stock, the last part of which is a narrow descending range of about 10 points. This 18 month long range remains intact as long as the price manages to remain above $33.

This range bound price action can either be a consolidation before the next down leg or a consolidation making a base for a reversal. The volume pattern so far doesn’t give any major clue but the spike of the last session shows a serious selloff. Yesterday, the price broke the major bottoms of November 2012 at $36.94 & June 2012 at $36.73, though managed to close above that. But it still closed below the swing low on July 2013 at $37.50 and the trendline connecting all these lows, currently standing at $37.60 for this week.

The daily chart shows a clear 5 wave progression from the May 2013 high of $44.13. The last drop to $35.98 can possibly be the 5^th wave. At $35.98, this supposedly 5^th wave is exactly 61.8% of the total magnitude of the 1^st & 3^rd wave. If that is really the case, we can expect a bounce now to $40 levels before the next major fall. But the price must go and sustain above $37.60 to bring this short term bullish scenario to the table.