Focused on accelerating the transition to clean energy, CF Industries aims to sustainably feed and fuel the world. And as the stock market indexes sell off, CF stock continues to cultivate an ascending base with its relative strength line rising to a new high.
CF Industries makes ammonia as its basic product, which can be used as fertilizer or upgraded into nitrogen products. Committed to decarbonize its network, the company produces both green and blue ammonia. CF expects both green hydrogen and ammonia to play a critical role in helping the world achieve net-zero carbon emissions by 2050.
Such goals drive demand for CF Industries, which sports the highest-possible 99 Composite Rating. Fellow agrochemical industry peers ICL Group, Mosaic and Nutrien share that stellar rating in IBD Stock Checkup.
Showing its strength in a weak market, the group ranks No. 9 among the 197 groups IBD tracks.
Green Energy Stock Fuels Explosive Growth
CF Industries operates nine manufacturing complexes in the U.S., Canada and the United Kingdom, running the world's largest ammonia production network. The company enables green and blue hydrogen and nitrogen products for energy, fertilizer, emissions abatement and other industrial activities.
Based on the prior-year quarter that showed a loss, CF Industries delivered a whopping 1,120% earnings increase in Q3. For Q4, analysts expect the company to produce a 1,067% EPS increase when it reports Q4 numbers on Feb. 17. Wall Street forecasts 330% for the full year, followed by 97% growth in 2022.
Sales growth has accelerated over the last four quarters from an 18% slowdown in Q3 2020 to a 61% increase in Q3 of 2021.
CF Industries Bucking Market Trend, Tops Peers
As the market melts down, CF Industries fertilizes an ascending base showing a 74.87 buy point. A trendline could offer an earlier entry, but note the selling pressure in the general market. Breakouts are prone to failure in this type of environment.
What characterizes an ascending base? Often formed in choppy markets, this rare but potentially powerful chart pattern has a series of three pullbacks. The decline in each pullback ranges from about 10% to 20%. Each pullback must mark a higher high and a higher low. That's what gives the ascending look.
CF stock has fared better than its agrochemical peers recently. After a breakout earlier this month, Mosaic has given back those gains. It is now testing support at its 50-day moving average. ICL is also testing that benchmark line. After a breakout in late December, Nutrien has retreated below its 50-day line.
If CF Industries manages to buck the stock market trend and break out, proceed with caution. And look for the Nasdaq, S&P and Dow to establish a market bottom and rebuild. Ultimately, CAN SLIM investors want to see the indexes flash a follow-through day to signal a potential change in trend for the better.
Follow Matthew Galgani on Twitter at @IBD_MGalgani.
