Wednesday, May 30, 2007

Ugly Chart - ADM

I have been in the process of identifying potential shorting opportunities. I don't know where the general market will be in the next several months, but we are reaching overbought levels and a pull back wouldn't be all that astounding.

My general thesis is to target weaker equities. The methodology behind this is simple. When and if the market does turn south, these under performers are more likely to continue under performing when compared to their outperforming counterparts.

One of these such companies is Archer Daniels Midland Co. (ADM), an integrated transporter, producer, and marketer of agricultural commodities. Over the last two years, ADM has received significant attention due to their position as the worlds largest ethanol producer. While I enjoy the longer term prospects of this company, the immediate future doesn't appear so promising. After the market's lack luster response to FQ3 earnings, shares continue to drudge lower.

Most recently the stock moved through the pinnacle 200 DMA, on above average volume. If this potential barrier can hold, ADM could quite possibly flirt with the bottom trendline near $33.00 per/share. While this level would make the company fundamentally undervalued, one must not ignore the buying and selling pressures depicted in the technical landscape.

Rather unimpressive daily chart.

Equally unimpressive weekly chart.

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