Stock Chart TRA

Posted by downtowntrader | 9/03/2008 10:20:00 PM | 0 comments »

Stock Chart Analysis TRA

Terra Industries Inc. (Public, NYSE:TRA)

Below is a weekly chart of TRA. It has been in a healthy uptrend and recently has been trading sideways in a range. Is the Ascending Triangle below a Continuation base or a Topping Pattern?

That was a trick question, as it could be either depending on which way it breaks out or down. However, volume is suggesting that this is a topping pattern, and that TRA is under heavy distribution. An important concept that many traders miss is that heavy volume is not always bullish. Heavy volume is valuable during a breakout or at an important low. However, heavy volume with no substantial movement signals that one party is "distributing" the stock to another. When there is heavy volume AFTER a strong uptrend, it's usually institutions distributing stock to retail investors. When you see heavy volume AFTER a log trend lower, the it's usually institutions accumulating from retail investors. Notice the common theme? Institutions are rarely transparent with their intentions, however, they can't hide the volume they trade.

In looking at TRA, it really has been in a sloppy range on the daily, however, the weekly is pretty well defined. It has been finding support at the 200 day sma on the daily chart with 6 touches over the past 6 months, but it hasn't been able to muster any real trend. Technically, it still can breakout higher from this triangle, but the heavy increase in volume has me a little skeptical. So, while the short agriculture trade may be getting crowded, TRA looks like one of the next to rollover to me.

Good Trading,


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