High on POT

No, my title is not referring to cannabis but rather the world’s largest fertilizer company Potash, NYSE symbol, POT.

My favorite (and one of the most statistically effective) breakout patterns is that from a rectangle.  If long enough in duration, this type of consolidation allows most sellers to rid themselves of their shares leaving only buyers and those who are still short. This is an environment that can have incredible upside potential as buyers step in bidding the price higher while shorts are squeezed, a very potent breakout combination.

As you can see in the weekly chart below, POT bottomed in January while RSI momentum formed bullish positive divergence, providing supporting confirmation a likely bottom was in place. As you would expect due to the strength of the decline (~55%), it took a long time (almost a year) for the majority of sellers to exit and a potential reversal to appear. Price broke out of the blue rectangular box last week with conviction. While it was on higher volume, I would have preferred it be higher. Based upon this, It would not be unexpected price to fall back to the upper boundary of the rectangle and test it as support before it takes off higher to its pattern target some 17.5% higher in the weeks/months ahead. Beyond the pattern target, real resistance does not come into play until the 25-27 area (which is where I expect it to finally go) providing an upside potential of over 50%.