Archer-Daniels up as corn prices expected lower

Posted Mar 30th 2007 12:40PM by Brent Archer
Filed under: Forecasts, Good news, Archer-Daniels-Midland (ADM), Options, Technical Analysis

Archer-Daniels-Midland Co. (NYSE: ADM) opened at $37.55. So far today the stock has hit a low of $37.40 and a high of $37.84. As of 12:35, ADM is trading at 37.08, up 0.32 (0.9%).

After hitting a one year high of 46.71 in May, the stock slid to a year low of 30.20 in January. The stock has been pulling itself upward over the past two months, and is rising today following expectations of higher corn production in 2007. This could significantly cut costs for ADM, the world's largest corn processor. The technical indicators for ADM have been bullish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $30 range. ADM hasn't been below 30 since January of last year and has shown support around 33.50 recently. This trade could be risky if the company's ethanol business slides due to lower oil costs, but even if the stock slips a little, it could find support from its 50 day moving average, which is around 34.

Brent Archer is an options analyst and writer at Investors Observer. (Free Subscription)

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about.

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