By Stockpickr Staff
Updated at 12:41 p.m. EDT on May 15, 2009

Agriculture stocks have been lighting up trading screens across Wall Street all week. Even when the entire stock market was dropping, this sector was bucking the downtrend and trading sharply to the upside.

Names such as China Green Agriculture (CGA), Potash Corp. of Saskatchewan (POT), Monsanto (MON) and Terra Industries (TRA) have all been ripping higher as investors bid up the entire sector off of Tuesday’s World Agriculture Supply and Demand Estimates report. The report said U.S. commodities production will drop slightly while consumption will increase in May compared with last month. This drop in production will result in a reduction in world stocks.

Another positive report for the ag sector came out on Wednesday from the USDA. The report said for 2009 and 2010 the USDA expects the second-highest corn yields in history and extremely low stocks-to-use ratios. One more bullish data point for the ag sector was the China trade report that showed a 55% increase in soybean imports since last year.

Potash Corp., the world’s largest producer of potash, said on Thursday that the company will continue to curtail output until demand from China increases. Potash’s CEO, Bill Doyler, said that the annual talks on pricing between China and global potash producers are expected to conclude by the end of June. Apparently investors are anticipating that the talks with China and the world outlook for pricing are heading in a bullish direction as seen by the strong upside action in the stocks.

With this in mind, let’s take a look at a few ag stocks that could be setting up to make a significant move.

1. Mosaic

Mosaic (MOS) is a producer of phosphate and potash crop nutrients for the agricultural industry. Looking at the chart below, you can see that shares of Mosaic have started to break above some significant overhead resistance at around $50 a share. This was a key resistance level at which the stock has failed three times in the past.

Even more bullish for the stock is the breakout above the 200-day moving average of $50.53. The stock has now cleared that level and looks ready to make a significant run higher.

It would not be out of the question to see Mosaic make an attempt to fill the gap down from back in October that saw shares fall from more than $80 to around $50 a share. Simply put, this stock could have 30 points of upside even from current levels.



2. Agrium

Next up is Agrium (AGU) a retailer of agriculture products and services in the U.S., as well as in Argentina and Chile, and a global producer and wholesale marketer of nutrients for agricultural and industrial markets. On Wednesday, the company’s CEO, Mike Wilson, said he sees a rebound in fertilizer demand by autumn of 2009 and spring of 2010. The stock quickly responded to those bullish comments and continues to print higher prices.

Looking at the chart below, you can see that Agrium has been trading in a bullish uptrend channel since December 2008. The stock has now cracked through some overhead resistance at around $47 to $48 a share. If the bullish price action continues, Agrium could easily be on its way towards $60 to $65 a share. It’s also worth noting that Agrium has started to trade above the 200-day moving average of $44.96, and more than 4.5% of the float is sold short as of May.



3. AgFeed Industries

A speculative ag stock with an interesting chart is AgFeed Industries (FEED). This company is engaged in the research and development, manufacture, marketing, distribution and sale of pre-mix fodder blended feed and feed additives primarily for use in China's domestic pork husbandry market.

Looking at the chart below, you can see that AgFeed has made a big move from $1 to more than $4 a share on extremely heavy volume in the past two months. The stock has now hit some major resistance around the 200-day moving average of $4.49 Investors should now look for the stock to consolidate some of those big gains and possibly trade down to $3.30.

If the stock can regain its strength and trade back to $4.49 and take out some more resistance at $5.38, it could be well on its way back towards $10 a share. Keep in mind that more than 13% of the float on AgFeed is currently sold short as of May. A major short squeeze could be in the cards if the stock can fight its way above those resistance levels mentioned above.



4. Intrepid Potash

The final ag stock worth considering is Intrepid Potash (IPI), a producer of muriate of potash. This company is often the source of takeover rumors and once was one of the hottest IPOs around.

Looking at the chart below, you can see that Intrepid Potash has been trading in a range from the upper $20s to around $14 a share since November 2008. The stock has now exploded above the upper-end of the range and shares have broken above the 200-day moving average of $24.62. The stock now looks ready to make a run back towards $35 a share or possibly even higher.

As of May, more than 11% of the float is sold short. This high short interest could fuel even higher prices if those bearish bets on the stock are forced to cover as the stock moves up. Volume has been starting to really pick up on up days in May, so those shorts might be starting to get very nervous.



For more ideas, check out the Charts of the Week portfolio.

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