Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

With major indexes testing support last week, we highlighted that while we expect to see indexes firm up based on YTD trends, the potential for breakdowns was not far off. In today’s report we assess the damage and highlight key support levels.  We also highlight attractive Groups  and stocks within the Materials, Utilities, and Consumer Staples Sectors.

With major indexes testing support last week, we highlighted that while we expect to see indexes firm up based on YTD trends, the potential for breakdowns was not far off. In today’s report we assess the damage and highlight key support levels.  We also highlight attractive Groups  and stocks within the Materials, Utilities, and Consumer Staples Sectors.

Key Support Levels Being Tested for U.S. Indexes

<ul>
<li>
We are downgrading Consumer Discretionary to market weight as retail breakdowns and continued weakness in homebuilders and major autos has led to price and RS uptrend violations for the Sector. Reduce exposure.</li>
<li>
Many major indexes testing support. We cover the S&amp;P 500, Dow, small-caps, PHLX Semiconductor, international developed and emerging markets, which are all at logical support areas. While we expect to see these indexes firm up at current levels based on YTD trends, the potential for breakdowns is not far off.</li>
<li>
Big picture trends. The cyclicals  vs. staples ratio remains elevated and has not broken down. Something similar can be said of the growth vs. value ratio, where the uptrend remains intact.</li>
<li>
In today’s report we highlight attractive Groups and stocks within Energy, Consumer Staples, Materials, and Utilities.</li>
</ul>



We are downgrading Consumer Discretionary to market weight as retail breakdowns and continued weakness in homebuilders and major autos has led to price and RS uptrend violations for the Sector. Reduce exposure.

Many major indexes testing support. We cover the S&amp;P 500, Dow, small-caps, PHLX Semiconductor, international developed and emerging markets, which are all at logical support areas. While we expect to see these indexes firm up at current levels based on YTD trends, the potential for breakdowns is not far off.

Big picture trends. The cyclicals  vs. staples ratio remains elevated and has not broken down. Something similar can be said of the growth vs. value ratio, where the uptrend remains intact.

In today’s report we highlight attractive Groups and stocks within Energy, Consumer Staples, Materials, and Utilities.


Yield Surge Tests Equities; Downgrading Discretionary

Both Energy and Materials have hurriedly advanced within our relative strength rankings over the past several weeks--now ranking #2 and #4, respectively--confirming the widespread patterns visible in the charts of each Sector’s constituents: bottoms and bases.We have highlighted these evolving set-ups over the past year, identifying: improving internals in energy (Aug. 12), then labeling it as a bottom the following week; also, reiterating copper nearly twelve months ago from today, recommending fertilizers (Dec. 13), and reiterating metals &amp; mining stocks (Dec. 18).Given the improving relative strength trends coupled with constructive patterns, we are upgrading both sectors to overweight from market weight.

Both Energy and Materials have hurriedly advanced within our relative strength rankings over the past several weeks--now ranking #2 and #4, respectively--confirming the widespread patterns visible in the charts of each Sector’s constituents: bottoms and bases.We have highlighted these evolving set-ups over the past year, identifying: improving internals in energy (Aug. 12), then labeling it as a bottom the following week; also, reiterating copper nearly twelve months ago from today, recommending fertilizers (Dec. 13), and reiterating metals &amp; mining stocks (Dec. 18).Given the improving relative strength trends coupled with constructive patterns, we are upgrading both sectors to overweight from market weight.

Upgrading U.S. Energy & Materials Sectors to Overweight

Potash Corp Of Saskatchewan / Technical Analysis

Breakouts in global fertilizer/potash stocks -- buy<ul><li>Breakouts from multi-year base and bottom patterns are the norm in North American names, including: AGU, CF, IPI, and POT. All four are buys.</li><li>Abroad, in Europe and EM, pullback opportunities are visible in OCI NV (OCI-NL), Incitec Pivot Ltd (IPL-AU), Sociedad Quimica y Minera de Chile (SQM), and Yara Int’l (YAR-NO), Here, too, all four are buys.</li><li>For ETF investors, the Global X Fertilizers/Potash ETF (SOIL) is this theme’s closest pure-play. The names highlighted above account for a 35.8% weighting.</li></ul>

Breakouts in global fertilizer/potash stocks -- buyBreakouts from multi-year base and bottom patterns are the norm in North American names, including: AGU, CF, IPI, and POT. All four are buys.Abroad, in Europe and EM, pullback opportunities are visible in OCI NV (OCI-NL), Incitec Pivot Ltd (IPL-AU), Sociedad Quimica y Minera de Chile (SQM), and Yara Int’l (YAR-NO), Here, too, all four are buys.For ETF investors, the Global X Fertilizers/Potash ETF (SOIL) is this theme’s closest pure-play. The names highlighted above account for a 35.8% weighting.

Global Fertilizer/Potash Stocks Are Breaking Out. Buy.

Founder and Strategist, Entext Economics & Strategy

Sean Maher

Founder and Strategist

Entext Economics & Strategy

Entext provides institutional investors with distinctive, actionable asset allocation and thematic research, which typically challenges the market consensus. Our clients range from credit, equity and multi-asset hedge and pension funds to family offices and sovereign funds. 
 
We focus on identifying key inflection points in macro data and relative asset performance amid the 'groupthink'  and confirmation bias that characterizes most investment bank analysis.

Macro Driven Investment Insight

Thematic (Sector/Industry)

<ul>
<li>As more macro funds shut their doors in despair, global rate and FX volatility has revived as the BoE turned hawkish - 2-yr gilt yields have soared 4x in three months, driving a short squeeze in sterling.</li>
<li>The Fed has reaffirmed the beginning of its balance sheet rundown and up to 100bps on rates by end 2018 – like the ‘surprise’ oil rally over the past month, a USD one may be imminent.</li>
<li>As in the UK, US trend GDP and productivity growth has slowed, and monetary policy can do very little to boost it…</li>
</ul>


As more macro funds shut their doors in despair, global rate and FX volatility has revived as the BoE turned hawkish - 2-yr gilt yields have soared 4x in three months, driving a short squeeze in sterling.
The Fed has reaffirmed the beginning of its balance sheet rundown and up to 100bps on rates by end 2018 – like the ‘surprise’ oil rally over the past month, a USD one may be imminent.
As in the UK, US trend GDP and productivity growth has slowed, and monetary policy can do very little to boost it…


Macro Funds Lose Faith, Precision Farming Revolution Looms

United States

Westlake Chemical Corporation manufactures and markets basic chemicals, vinyls, polymers, and fabricated products.  The Company serves a range of consumer and industrial markets, including flexible and rigid packaging, automotive products, coatings, and residential and commercial construction.

Albemarle Corporation produces specialty and fine chemicals.  The Company's chemicals are additives to or intermediates for plastics, polymers and elastomers, cleaning products, agricultural compounds, pharmaceuticals, photographic chemicals, drilling compounds, and biocides.  Albemarle produces the majority of its products in the United States.

Axalta Coating Systems Ltd. manufactures, markets and distributes coatings systems. The Company offers products and services which includes paint, color matching tools, application technologies, and customer  training and business management systems. Axalta Coating Systems serves automotive, transportation,  general industrial, and architectural and decorative sectors.

FMC Corp operates as a diversified research company in the chemical industry. The company offers technology solutions for agricultural, industrial, and consumer markets. FMC Corp offer an array of technologies in research and development to improve delivery of medications, enhance foods and beverages, power batteries, protect crop yields, and advance textile manufacturing.

RPM International, Inc. manufactures, markets, and sells various specialty chemical product lines. The Company's product lines include specialty paints, protective coatings and roofing systems, sealants and adhesives, focusing on the maintenance needs of both the industrial and consumer markets.

Celanese Corporation is a global integrated producer of chemicals and advanced materials. The Company's products include acetyl, acetate, vinyl emulsion, and engineered polymers. Celanese Corp's operations are primarily located in North America, Europe and Asia.

Eastman Chemical Company is an international chemical company which produces chemicals, fibers, and plastics.  The Company's operations include coatings, adhesives, specialty polymers, and Inks, fibers, performance chemicals and intermediates, performance polymers, and specialty plastics.

The Mosaic Company produces and distributes crop nutrients to the agricultural communities located in North America and other countries.  The Company's principal products include concentrated phosphates, and potash.

Element Solutions Inc operates as a specialty chemicals company. The Company manufactures and supplies specialty chemicals used by the electronics, metal and plastic plating, graphic arts, and offshore oil production and drilling industries. Element Solutions serves customers worldwide.

Huntsman Corporation manufactures differentiated and commodity chemical products.  The Company markets a broad range of chemical products and formulations to a diversified group of consumer and industrial customers. Huntsman's products are used in a range of applications, including those in adhesives, aerospace, automotive, construction products, and consumer products.

TORAY INDUSTRIES, INC. manufactures yarns, synthetic fibers, and man-made leather used as apparel and industrial materials.  The Company also makes chemical products such as polyester films, engineering plastics, and resin materials.  Toray develops information equipment such as electronic circuit and liquid crystal color filter.

LG Chem Ltd. is a chemical manufacturer.  The Company's products include petrochemicals, plastic resins, and engineering plastics.  LG Chem also produces industrial and electronic materials.

NITTO DENKO CORPORATION manufactures and markets a wide range of chemical products which are used as materials for industrial and electronic components. The Company's products include materials for sealants, semiconductors, and wrappings.  Nitto Denko has a network of sales/manufacturing subsidiaries worldwide.

Formosa Chemicals & Fibre Corporation manufactures and markets petrochemical products, nylon fiber, and rayon staple fiber.  Formosa sells its products in Taiwan and exports to Asia.

Solar Industries India Limited manufactures and supplies explosives and explosives accessories. The company's products include bulk, cartridge, detonators, detonating cords Pentaerythritol Tetranitrate ("PETN"), and cast boosters.

Satelltte Chemical Co., Ltd. develops, manufactures and sells acrylic acid esters, methacrylic acids, pigment intermediates, acrylic emulsion polymers, super absorbent polymers, and other acrylic downstream products.

Qinghai Salt Lake Industry Co.,Ltd manufactures and markets fertilizer products. The Company produces potash fertilizers, potassium chloride, and other products. Qinghai Salt Lake Industry also produces salts, chemicals, and other products.

Berger Paints India Limited manufactures and distributes paints, enamels, varnishes, and synthetic resins. The Company's products are used in home, office, factory, interiors, exteriors, metal, wood, plastic, and others.

Sichuan Tianqi Lithium Industries, Inc. develops, manufactures and sells lithium products.  The Company's products include industrial lithium carbonate, battery lithium carbonate, lithium chloride, and lithium hydroxide.

The Fertilisers and Chemicals Travancore Limited manufactures petrochemicals and fertilisers.  The Group's products include Ammonia, Sulphuric Acid, Phosphoric Acid, Ammonium, Urea, Caprolactam, Nitric Acid and Soda Ash.

CF Industries Holdings, Inc. manufactures and distributes nitrogen and phosphate fertilizer products globally. The Company's principal products in the nitrogen segment are ammonia, urea, urea ammonium nitrate solution, ammonium nitrate, diesel exhaust fluid and aqua ammonia. The principal products in the phosphate segment are diammonium phosphate and  monoammonium phosphate.

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Cf Industries Holdings (CF US)

Key Support Levels Being Tested for U.S. Indexes

With major indexes testing support last week, we highlighted that while we expect to see indexes firm up based on YTD trends, the potential for...

Vermilion Research

Yield Surge Tests Equities; Downgrading Discretionary

We are downgrading Consumer Discretionary to market weight as retail breakdowns and continued weakness in homebuilders and major autos has led to...

Vermilion Research

Upgrading U.S. Energy & Materials Sectors to Overweight

Both Energy and Materials have hurriedly advanced within our relative strength rankings over the past several weeks--now ranking #2 and #4,...

Vermilion Research

Global Fertilizer/Potash Stocks Are Breaking Out. Buy.

Breakouts in global fertilizer/potash stocks -- buy Breakouts from multi-year base and bottom patterns are the norm in North American names,...

Vermilion Research

Macro Funds Lose Faith, Precision Farming Revolution Looms

As more macro funds shut their doors in despair, global rate and FX volatility has revived as the BoE turned hawkish - 2-yr gilt yields have...

Sean Maher

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