Stock Market Update Aug 31, 2008

http://www.ttstrading.com/ Time to start looking at some stock to buy of companies within the specialty chemicals industry. The chemical industry is very bullish right now. Many companies that have exposure to chemicals and petroleum related chemicals have undergone a substantial downward correction occurring between the last 3 months- 2 years. This correction is beneficial to you as a chemicals investor because it will allow you to buy more stock at a cheaper price.

Analysis of Potash Corporation of Saskatchewan Inc. (NYSE:POT)

52 Week High = $241.62 (06/19/08)
52 Week Low = $82.76 (08/26/07)
Current Closing Price = $176.69 (08/24/08)
Recommended Entry Price = @ or below $136.50 - $132.50
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Peak to trough YTD, this stock has skyrocketed 191%. The risk associated with taking a new position on this equity is extremely risky due to the huge rally that has already occurred. The upward momentum of POT as we've seen is likely not going to continue over the long term. As stated above, the entry price for POT is $136.50. This should tell you that I expect share price to drop another 23% from its current value. This decline should occur within the next 7-12 trading days so be sure to have your LIMIT ORDER in place within this price region. If POT does bottom in this price region then you should expect between a 30% ($173 target) to 51%($199 target) return on equity. This rally should occur over the next 3-4 months. The "high risk" I spoke of earlier occurs if you choose not to sell your position between $173-$199. If you choose to hold the position for a new high above $241.62 then your risk just quadrupled. POT will likely decline back to your entry price after rallying to around $200, wiping out all of your profit and then fall to a new low of $99-$115 (or even as low as $55). You should not adopt an investor mentality towards this stock, this should remain a 3-5 month trade.

An alternative to Potash would be Sunoco. Sunoco (nyse:SUN) produces commodity petrochemicals much like PCS but SUN also has exposure to petroleum products including gasoline, middle distillates, and residual fuel oil. As you can see Sunoco's profitability is more accurately balanced. SUN is also a Mid Cap as where POT is a Large Cap. Buy in the $36- $37 range and take profit at $60. If SUN can break through $63 then it could return 150% in 15 months.




The S&P 500 is a good 100 points away from entering a crash scenario so you have some room to work with the broader indexes.

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