While the historic drop in global financial markets and fear of a pandemic may be the only thing on the minds of many investors, it may prove to be a prudent move to take a breath, step back, and try to look at the situation from a different perspective. The sharp declines in assets prices could be viewed as a buying opportunity for those with a long-term view of the markets.
One theme regardless of market conditions that could be worth closer analysis is agriculture. Fundamentally speaking, underlying demand for agricultural products will continue to act as a catalyst in the future for moves higher, and well-positioned traders will be able to profit from the move.
Invesco DB Agriculture Fund (DBA)
The downtrend in agriculture over the past several years has been fueled by adverse weather conditions and weak underlying demand for products such as crop inputs. Taking a look at the chart of the Invesco DB Agriculture Fund (DBA) below, you can see that the sector is not exempt from the recent concern over the spread of the coronavirus.
While there are no sectors untouched from heightened volatility, it is worth drawing attention to how the recent sell-off has sent prices toward the support of the 2019 summer lows. Only a few short weeks ago, traders would have only wished for an opportunity to buy at these levels in anticipation for a rise toward the long-term resistance just north of $16. This longer-term view could prove beneficial as traders look to navigate this market.
Archer-Daniels-Midland Company (ADM)
For those who follow the agriculture sector, companies such as Archer-Daniels-Midland Company (ADM) need no introduction. As you can see from the 10-year weekly chart, the stock has been trading within an established uptrend, which is common throughout most major players in the sector.
The sharp decline over the past several trading sessions has sent the stock price toward the support of the lower trendline of an established ascending triangle pattern. Given the time period that is showcased in this chart, the recent decline could be presenting traders with a very lucrative buying opportunity. Months from now, active traders could be buying on a move above the horizontal trendline and looking for a move higher from there. Buying near multi-year lows could prove to be a strategic move for those willing to assume the risk and long-term investment horizon.
Deer & Company (DE)
Another agriculture company that needs no introduction is Deere & Company (DE). As you can see from the 10-year weekly chart, the bulls are in clear control of the uptrend.
The recent bounce off of the upper trendline toward the long-term support could be an interesting buying opportunity. From a risk management perspective, stop-loss orders will most likely be placed below $132.66 to protect against a move lower should the recent market concerns continue in the months ahead.
The Bottom Line
There is no shortage of doom and gloom in this market. The recent sharp moves lower have many investors flocking to the exits in hopes of locking in multi-year gains. For those who follow the agriculture sector and have a long-term view, the move lower could be presenting a buying opportunity.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.