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Wheat ears stand before harvesting near a Massey Ferguson tractor on a farm in Great Wilbraham near Cambridge, U.K., on Saturday, Aug. 18, 2012. Soybean and wheat prices may extend rallies because demand for the oilseed hasn't slowed, and dry weather from the U.S. to Russia may cut global grain production, said Ana Puchi-Donnelly, the senior agricultural commodities trader at Marex Spectron Group. Photographer: Simon Dawson/Bloomberg (Simon Dawson/Bloomberg)
Wheat ears stand before harvesting near a Massey Ferguson tractor on a farm in Great Wilbraham near Cambridge, U.K., on Saturday, Aug. 18, 2012. Soybean and wheat prices may extend rallies because demand for the oilseed hasn't slowed, and dry weather from the U.S. to Russia may cut global grain production, said Ana Puchi-Donnelly, the senior agricultural commodities trader at Marex Spectron Group. Photographer: Simon Dawson/Bloomberg (Simon Dawson/Bloomberg)

Schizas’ Mailbag

No rise in sight for Alliance Grain Traders Add to ...

Hi Lou,

What is your opinion of Alliance Grain Traders?

Thanks,

Joe

Hey Joe,

Thanks for the assignment. I last ran the charts for Alliance Grain Traders Inc. on Feb. 17, 2012 when Peter wanted to know if a bottom was near. The analysis at the time was that a further decline was evident and that the stock would not hold onto the $14.94 it was trading for. The MACD was in a steep decline and the stock kept melting through support all along the decline. It was advised that the best case scenario was for a capitulation that would washout the sellers. In hindsight that is exactly what happened. The selling continued taking the stock to its 52 week low of $10.02 on May 16, 2012, where it caught a bounce.

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Another review of the charts will help inform your decision as how best to proceed with your investment.

The three–year chart provides a textbook example of trend and resistance. The downtrend that started in February of 2010 when the shares were trading at $32.00 became a level of resistance that could not be overcome. From there the retreat all the way to $10.02 repeatedly met resistance along the the trend line and the 50-day moving average. The bounce off the rock bottom was signalled by the MACD and the RSI which indicated a shift in momentum as the sellers left the field of battle and put buyers in control of the stock.

The six-month chart illustrates the reversal of the downtrend and the buy signal generated by the MACD and the RSI that indicated that the bottom was in. The advance has been very generous to investors who caught the ride at any time up until late August. The last four weeks have seen a pullback from $17.00 and the testing of support along the 200-day moving average. The MACD and RSI are not generating strong buy or sell signals so it is time to be somewhat thoughtful as how best to proceed.

The descending triangle pattern that has surfaced from the highs in August has me putting a caution flag on the track. In addition, the lack of signals from the momentum indicators has me flying with low visibility. I would counsel being patient as to the outcome of the descending triangle before committing capital.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it to lschizas@globeandmail.com.

 
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