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CF Industries Stock Is Poised to Change Direction

CF has managed to violate its prior downtrend as well as resistance.
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CF Industries Holdings Inc. (CF) may finally be ready to sprout.

Shares of the Illinois-based fertilizer company have formed a notable technical pattern. The CF chart, below, shows that after a significant run up in price from July through September of last year, the stock peaked in early October, followed by a downdraft that violated the prior uptrend as well as $50.50 support.

From that point, the shares made a series of lower highs and lower lows with a fairly definable downtrend line.

In mid-April of this year CF finally managed to close above the downtrend line as well as the $44.50 price level that had been functioning as resistance for the previous four months. Also of note is the move occurring with a sizable increase in trading volume that suggested demand was overtaking supply.

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Source: Worden

Late May saw the stock tests its low in the $40.00 area, which was followed by a break above $44.50 resistance, again on higher trading volume. The 50-day moving average was also violated to the upside.

Meanwhile, CF has subsequently made a series of higher highs and higher lows.

The "volume at price" (VAP) bars (horizontal red/green) now suggest initial resistance around $47.43 with secondary resistance near $50.50.

The stock has recently retraced. which may suggest a possible test of support at $44.50.

Bottom Line

Given the facts that CF has managed to violate its prior downtrend as well as resistance on increasing volume and subsequently made higher highs and higher lows, we believe CF may have formed a "bullish reversal pattern."

At the time of publication, Ortmann had no positions in CF.