Archer-Daniels-Midland Co. (ADM)
(3/8/07)

ADM is a play on Ethanol, and corn in particular, which is at eleven year highs.  For the most part, ADM has benefited since grains started breaking out last summer.

If the wave outlook is correct, ADM would be in the early stages of a Wave (5) to complete an advance that began in the late 80s.  Waves (1) and (2) took place during the last major bull and bear markets for corn, and the stock traced out an expanded flat in Wave (2) during part of it.  The trading therefore does appear to be responsive to price movements in the grain.  Waves (1) and (3) are also exactly related by 2.618, which adds confidence to the model.   The decline in the stock between May 2006 and January 2007 traced out correctively, and the 5-wave bounce off its January 16 low of 30.46 counts well as Wave 1 of a new Wave (5).  If the decline did ultimately prove to be incomplete and this were simply a recovery, we would still expect a zigzag style bounce that would be tradable.  Under the more bullish scenario, Wave 3 would be made at around 42.70.  We'd ultimately expect a retracement of the 46.71 high, and new high just above in the 47 area.  If this were just a zigzag pattern, then we'd look for highs at 38 or 40.  C waves and third waves are similar, so if the stock got stuck at one of these resistance areas, then it would likely be the Wave C.  35 is an entry, with 32 and 30 as stoploss choices, per your tolerance.  

For an option play, you can consider the September 2007 $35 Call (symbol ADMIG), currently selling for $3.40 with the Delta at 0.58.  

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