How We Made A Solid Trade When Bulls Said "MOO"

Agriculture doesn’t normally get investors excited about huge growth prospects. But as sideways action took hold of the Nasdaq composite while the average stock rose, the money had to be flowing somewhere. We identified the VanEck Agri Business ETF (MOO) as a way to participate in the move outside of technology.

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A Breakout For MOO ETF

After forming a flat base over five months, MOO started to look attractive near a resistance area around 75 (1). That was a legitimate early entry but we waited a few more points for the traditional breakout from the flat base (2). We initially started with a quarter position in one of the larger holdings, Nutrien (NTR). We added a half position in MOO to SwingTrader later that same day. Since the whole group was moving it gave us extra exposure to the sector. The MOO ETF had the added benefit of a low average true range so we were taking on less risk despite the larger position.

A few days later, we added to the position making it a full 10% position in the model portfolio (3). That’s something we only do when a position is working in our favor.

With a 2.5% gain from our entry, we started to lock in some profit on strength (4). That might seem early but with the low ATR it was a larger move than MOO typically sees in that amount of time. We trimmed a little more on a downside reversal (5). Weakness usually follows that technical signal but it didn’t immediately in this case. MOO trickled lower for a few days and then got support at its 10-day moving average line. We started adding back to the position as it broke out to a new high (6).

Selling Into Strength

Probably the hardest part about holding the position in MOO was that the low ATR was great for reducing risk but it also meant rewards were slow going. When we saw another downside reversal (7), we took the opportunity to lock in some more profit. While MOO got support at the 10-day line again, we used the bounce this time to sell more into strength (8).

MOO got another reduction when the bounce didn’t make progress (9). At this point we had reduced the position down to just a quarter after the sells all between 85.55 and 85.99. Part of the decision was also to free up cash to move to other areas that were ready to break out as opposed to an area that had already made a move.

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With all the selling into strength, our final sell was on weakness on a break below 85 (10). But even now, MOO isn’t forgotten. While not the typical area you might think of for artificial intelligence, top component Deere (DE) has already seen a 35% move this year as autonomous farming and early stress detection in crops are getting a boost from AI analysis. The more than 1% move on Friday when the major market indexes were down means it might not be time to put this ETF out to pasture.

More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on X, formerly known as Twitter, at @IBD_JNielsen.

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