ADM Dives 24%: Why “Bad News” Was NOT the Culprit

For decades, EWI has pointed out that it is price movements that lead the news, not the other way around, as most people think. Let’s take a look at a classic, recent example.

There was media shock and horror this week as the share price of Archer-Daniels-Midland Company, the U.S.-based commodity trader, crashed. This coincided with news that its chief financial officer is going on leave, and it delayed its earnings release as it investigates accounting practices.

Predictably, the financial media stated categorically that the share price decline was caused by the news. However, the chart shows that a dramatic decline was very probably expected.

First of all, from an Elliott wave perspective, from the November 2022 peak, there was a very clear five-wave decline. Wave 2 of that decline exactly retraced a Fibonacci 0.764 of Wave 1 and Wave 4 retraced 0.382 of Wave 3. These are both classic ratios, making that five-wave decline into June 2023 textbook.

From the June 2023 low, the share price of ADM then rallied to an 86.30 peak in July. That was very close to the 0.618 retracement of the entire decline, labeled as Wave 1 in brackets. Thus, over the past few months, the probability was high that Wave 3 down was in operation.

Secondly, though, there was also a textbook “head and shoulders” top pattern playing out. Note the large divergence between the new high in the share price at the head in November 2022 and on-balance volume. Diminishing volume during the rally into the head is what you can expect from this pattern.

A subtle event happened in October 2023, where the share price made a marginal new low below that of June 2023, thereby eliminating what might have been a potential bullish triangle pattern. So, from at least November 2023, the evidence from this chart was very strongly suggesting that a dramatic decline was dead ahead.

The neckline of the head and shoulders top pattern was broken on a weekly closed basis, the weekend in the 12th of January, and reiterated at last Friday’s close. Thus, by the time the news came, the technical analysis of ADM share price had been overwhelmingly bearish for a long time.

The stock market’s job is to look forward, and that is why price moves tend to happen before news emerges. Stay tuned to EWI to keep one step ahead of the herd.

It’s easy to find some news that “explains” a price move

Two problems, though: 

  1. You’ve missed the move
  2. You still don’t know where prices are going next

When you watch Elliott wave patterns instead of the news, you fix both problems.  Every month, our Global Market Perspective gives you a confident look ahead in 50+ of the world’s biggest markets.

See for yourself inside our new Global Market Perspective.