What Lessons Can We Learn From Worst Performing Stock in 2010?

Have you heard of Monsanto (MON)?  MON is one of the worst performing stock from SP500 in 2010.  Just couple of years ago, MON was one of the best performing stocks  MON in 2003 was trading near $10 and took next 5 years to make all time high at $140.  Today, it is trading near $50.

During 5 years, MON showed an exponential arc.  A good trader knows that this exponential arc is not sustainable pattern and will eventually break causing a colossal collapse.  Looking back at 5 year chart, this is exactly what happened to MON.  I have circled the top month in June 2008.  This is called shooting star/reversal doji candle.  This pattern as some investors know is a sign for them to exit all LONG positions or enter SHORT positions.

The next chart zooms into last 2 years.  After the great fall, you can see that MON has been in consolidation period for quite a long time, trading between $90 range to $70.  That is until recently when it broke its consolidation range, marked by red circle.  Now, MON is trading near $50 and it seems to me like this stock is setting itself for another consolidation range just like the previous one.  Unfortunately, it is not clear on what the support and resistance levels are at this time.  I think there is still some more room to fall before moving higher into low $50s.

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