Archer-Daniels-Midland trades at historically highest levels but is there any risk?

The Archer-Daniels-Midland Company (NYSE:ADM) is trading at a price of $95.93. This is among the highest valuations in the company’s history. The agricultural stock is a key beneficiary of the ongoing support for the sector. The stock’s appreciation is also in line with rising commodity prices. What can be expected, therefore, is that a pullback in commodity prices would drag down the stock price.

Zacks Research rates the Archer-Daniels-Midland Company perfectly on three key parameters of value, growth, and momentum. Subsequently, the research house recommends a buy for the stock. However, there are two price indicators that investors should carefully consider. The PEG ratio is at 10.42, whereas an attractive PEG ratio is below 1. The forward PE is 18.45, while many value stocks will have single-digit PE ratios.

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Considering the fundamental indicators above, Archer-Daniels-Midland is overpriced. The stock is driven by excitement and thrill. As commodity prices reach full valuation, the company will attract a price pullback. Signs of this have begun. In fact, it is unlikely that the stock will cross above $100. The greatest risk for investors now is being in a bull trap.

ADM is trading lower this week compared to last week

Archer-Daniels-Midland is trading at an RSI of 80. The stock is certainly in the overbought region and set for a price correction. Over the last two weeks, the price range narrowed down, and the lower shadow of the candlestick grew longer. This week’s prices are also a dollar lower than last week’s. Adding these findings to the RSI that has pointed downwards, it is clear that a price retreat is nigh.

Summary

Archer-Daniels-Midland is a strongly recommended sell. The price is unlikely to break through the $100 emotional barrier. The greatest risk now is a bull trap.

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