Fertilizer stocks will soon enter a period of seasonal strength, and two stocks in particular look like attractive buys on any upcoming pullbacks.
Despite the stock market’s impressive performance so far in 2012, some industry groups are still flat or down for the year. These are the groups to keep an eye on, as we have seen new sector rotation that has continued to propel the major averages higher.
The materials sector has been lagging and is still below the February highs. A strong close this week in the Select Sector SPDR - Materials (XLB) would turn the volume analysis positive and might be enough to make it a market leader.
The strong volume and positive close seen in the fertilizer stocks last Friday suggests that demand is coming into this group. These stocks are part of the commodity or agricultural chemicals group, which is now in a strong seasonal period, and I would look to buy on any setbacks.
Chart Analysis: The weekly chart of the Commodity Chemicals group shows a strong close last week, suggesting that a new uptrend (line b) has begun. A higher close this week would support the view that a bottom is in place.