Stock Picks: ADM and CELG

The S&P 500 (SPX) continued its drop as it closed yesterday, June 18, 2018 at 2,773.75. We maintain our bullish outlook despite this slight dip. This brief pullback is most likely setting up the index for a higher low.

As SPX remains bullish, let’s look at stocks that show promise.

ADM – Archer-Daniels-Midland Company

The Archer Daniels Midland Company (ADM) is an American global food processing and commodities trading corporation.  Founded in 1902, they now have more than 270 plants and 420 crop procurement across the globe. The company processes and manufactures vegetable oil, protein meal, corn sweeteners, flour, biodiesel, ethanol, and other food and feed ingredients.

Technical analysis show that ADM is about to take out resistance of 47. This would trigger the large inverse head and shoulders reversal pattern on the weekly chart. To increase the odds of a successful breakout, the stock must generate volume of at least 7.2 million shares on the daily chart. Those who bought the higher low of 40 are likely to take profits at the resistance. ADM needs buyers to absorb the selling pressure.

Furthermore, fundamental analysis reveal that the trailing twelve months (TTM) price to earnings ratio (PE ratio) of ADM is 15.93.  The stock appears undervalued considering that it has a five-year maximum of 26.46 and an average of 17.46. Plus, recent earnings report beat expert estimates. Based on these figures, the stock has some room to grow.

The strategy is to buy the breakout at 47 as long as the pair generates the required volume. Once breakout is complete, bulls have the momentum they need to climb to our target of 60.

The process may take more than three months.

Weekly ADM Chart

Monthly ADM Chart

As of this writing, the Archer-Daniels-Midland stock (ADM) is trading at 46.19.

Summary of Strategy

Buy: Buy the breakout of 47 after the pair generates 7.2 million volume on the daily chart.

Target: 60

Stop: Close below 45 after the breakout.

CELG – Celgene Corporation

Celgene Corporation (CELG) is an American biotechnology company founded in 1986. It discovers, develops and commercializes medicines and therapies for the treatment of cancer and inflammatory diseases. In their product portfolio are REVLIMID (lenalidomide), POMALYST/IMNOVID (pomalidomide), OTEZLA (apremilast), ABRAXANE (paclitaxel albumin-bound particles for injectable suspension), VIDAZA, azacitidine for injection (generic version of VIDAZA), THALOMID (thalidomide), and the epigenetic modifier ISTODAX. Celgene’s subsidiaries include, among others, Juno Therapeutics, Impact Biomedicines, Inc., Signal Pharmaceuticals, and Pharmion Ltd.

Technical analysis show that CELG appears to respect support of 75. This view comes after the pair has managed to stay above the support for the last four weeks. This is because bulls are starting to show up. The significant rise in volume in May 2018 indicates that bulls are buying the stock. On top of that, the stock is almost oversold, suggesting the possibility of a bounce.

In addition, fundamental analysis reveal that CELG’s trailing twelve months (TTM) PE ratio stands at 21.88. The stock appears fairly valued but it has a five-year maximum of 64.24 and an average of 44.44. Moreover, the company’s recent earnings report beat analyst estimates. Considering these figures, CELG has some upside potential.

The strategy is to buy on dips as close to 75 as possible. If bulls preserve the support, they may spark a rally to our target of 98.

The process may take more than three months.

Weekly CELG Chart

Monthly CELG Chart

As of this writing, The Celgene Corporation stock (CELG) is trading at 77.73.

Summary of Strategy

Buy: As close to 75 as possible.

Target: 98

Stop: Close below 74.


Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.