Time for Options Bears to Jump on This Food Stock

Short sellers may provide headwinds for ADM

by Research Dept.

Published on May 29, 2019 at 12:23 PM

A close look at the technical setup for Archer Daniels Midland Co (NYSE:ADM) reveals a number of red flags. For starters, the stock is coming off a weak earnings performance just a few weeks ago, falling below the $40 level, which represents two times a major peak from 1997, as well as its 2018 closing low. Moreover, the shares have given up support at their year-to-date breakeven point, which could now act as resistance.

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What’s surprising given this technical outlook is that the majority of covering brokerage firms have bullish ratings on the stock. By the numbers, five of eight analysts have “strong buy” recommendations, which leaves the door open for downgrades to come through and hit the shares with headwinds.

Another potential headwind could come from short sellers. Specifically, short interest has fallen in recent months, though there was a slight uptick in the last reporting period. Should these bears return in force and bring short interest back to 2018 levels, it’ll make it difficult for ADM to gain any momentum.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this ADM commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

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