Archer Daniels Midland Co. (ADM) disappointed shareholders in Tuesday’s pre-market earnings report, missing EPS, and revenue estimates while raising their quarterly dividend by $.03/share. The mixed results are unlikely to attract the buying interest needed to clear a tight trading range that’s now entering its eighth month, despite strong institutional sponsorship that’s lifted accumulation-distribution technical readings to a 5-year high.

The company sells raw and processed agricultural materials, with price action levered to the agricultural futures pits. Those venues bottomed out at the same time as energy and metal commodities at the start of 2016, bouncing off deep lows in strong buying waves that have recouped the majority of multiyear losses. However, the group has stalled in recent weeks, due to tight correlation with emerging markets that have lost ground in reaction to the new president’s promise to renegotiate trade pacts.   

ADM Long-Term Chart (1993-2017)


A multi-year uptrend accelerated in 1989, lifting the stock into a rising channel pattern that persisted into the 1997 high at $22.33. The stock split seven times during this fruitful period, which gave way to a steep downtrend that continued into the second-half of 2000. A 10-year low in single digits finally ended the decline, yielding a quick bounce, followed by a two-year symmetrical triangle pattern that broke to the upside in 2004.

The stock gained ground at a rapid pace in the next three years, lifting to a May 2006 high at $46.71 and dropping into a broad top that tested range resistance in the first quarter of 2008. The rally ended just two points above the prior high, yielding a major reversal that accelerated to lower ground during the economic collapse. Selling pressure finally ended at a 5-year low at $13.52 in the fourth quarter while the subsequent recovery wave failed to recoup those losses, stalling at the .618 Fibonacci selloff retracement level in 2011.   

A broad consolidation gave way to a healthy trend advance in 2012, lifting the stock in a series of highs that reached the 2008 high in 2014. It broke out into 2015, but rally momentum failed to develop, yielding a year of mixed action on top of the new support, followed by a failed breakout and decline that posted a higher monthly low at $33.37 in January 2016. Price action since that time has carved a strong bounce that stalled at the .786 selloff retracement just ahead of the presidential election.

ADM Short-Term Chart (2014–2017)


The stock failed the breakout in August 2015 (blue line) while an October reversal at that level confirmed new resistance with a steep plunge into the start of 2016. The recovery wave into November 2016 stalled at the same price level, giving way to a triangular trading range that shows no signs of yielding a larger scale rally or decline. Meanwhile, price action since June has hugged the rising 200-day EMA, yielding seven tests at that level in the last eight months.

On Balance Volume (OBV) lost ground in the first quarter of 2016 and turned sharply higher in a major advance that signaled fresh institutional sponsorship. The indicator lifted to a 5-year high in November at the same time the stock traded more than six points below the 2015 rally peak. This positioning marks a bullish divergence, predicting that bulls will eventually prevail and lift the stock into a test at the 2015 high. However, this week’s less-than-stellar quarterly metrics are unlikely to fuel that advance.

The Bottom Line

Archer Daniels Midland settled on the 200-day EMA in June 2016 and has bounced along that support level for the last 8-months. Resistance at the 2015 breakdown and .786 selloff retracement level in the upper 40s has stalled progress, while this week’s mixed earnings report is unlikely to move the needle substantially in either direction. This impasse tells observant market players to look elsewhere for a favorable buying opportunity.  

<Disclosure: the author held no positions in aforementioned stocks at the time of publication.>

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