The American global food processing and commodities trading corporation, headquartered in Chicago, Illinois, Archer Daniels Midland Co (NYSE: ADM) seem poised for a price surge according to its latest charts.
#1 Symmetrical Triangle Pattern Breakout: A symmetrical triangle pattern has been formed in the daily chart as shown below. This is marked in purple color lines. This pattern is usually formed when there is an indecision in the price movements and uncertainty among the buyers and sellers. It represents a period of consolidation before the price breaks out or breaks down. Currently, the stock has broken out of the symmetrical triangle pattern. This usually signifies the start of a new bullish trend.
#2 Bullish Stoch: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#4 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is above the MACD signal line (orange color).
This is a possible bullish setup.
#5 Fibonacci Support: Usually, after an up-move, stocks typically retraces to any of the key Fibonacci levels before surging back again. ADM had taken support at the 50% Fibonacci support level as seen in the weekly chart. This seems like a strong support area for the stock.
#6 MACD above Signal Line: In the weekly chart as well, the MACD line (blue color) is above the MACD signal line (orange color). This is a possible bullish setup.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can buy half the intended quantity of the stock at the current price of $44.07.The other half can be purchased in any of the below scenarios.
- If the stock closes above $45.30.
- If the stock corrects to the support level of around $42.90.
TP: Our first target price is $52 and the second target price is $60 in the next 4-6 months.
SL: To limit risk, place a stop loss at $43.40 (for entry near $44.07 and $45.30) and $41.20 (for entry near $42.90). Note that this stop loss is on a closing basis.
Our target potential upside is almost 15% to 40% in the next 4-6 months.
- Entry at $42.90: For a risk of $1.70, our first target reward is $9.10 and the second target reward is $17.10. This is a 1:5 and 1:10 risk-rewards trade.
- Entry at $44.07: For a risk of $0.67, our first target reward is $7.93 and the second target reward is $15.93. This is a 1:12 and 1:24 risk-rewards trade.
- Entry at $45.30: For a risk of $1.90, our first target reward is $6.70 and the second target reward is $14.70. This is a 1:4 and 1:8 risk-rewards trade.
In other words, this trade offers nearly 4x to 24x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the symmetrical triangle pattern. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
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