ADM

This is a pretty darn good example of the market's games and Triangle tops that have been discussed in several names the last week or so. I know we have a couple of traders in ADM because we've emailed about ADM this weekend.

 Here's an example of a triangle top, it must proceed an uptrend of some significance. It also must be large, a few weeks doesn't cut it. I've been saying technical analysis has changed, it's being used against technicians, but you have to understand how it's changed. A Triangle top like this is expected to break out to the upside for many traders with less technical experience, they assume it's similar to a continuation pattern. Traders who have been around a little longer and are more old school, see these as potential tops. Then you have the "wait and see crowd" that will buy or short the first breakout, whether it's down or up. In my experience, these are almost always tops when proceeding an uptrend. However, more and more often we'll see a false breakout and that's exactly what we saw in ADM before a plunge, it is in reality a bull trap.  Currently, nearly two weeks of long positions are underwater.

This is what 3C looked like on the breakout, a negative divergence, although I would have bet it would have been a false breakout without even looking at 3C, only timing would have mattered (how long it stays above the triangle).

I think ADM has the long term potential to be a good trending short trade, in the short run, we have a 1 day oversold condition that could produce a bounce, which would be welcomed to short into strength. We'll also likely see volatility similar to my rant on the SPY when ADM approaches the lower triangle trendline. If you like the trade, then you have to accept this is the way it'll probably do down, but there's a reward here as well. ADM will eventually probably end up around $28, if the market cooperates, then it could be even lower. It's a bit too soon to use the trend channel yet as we need a downtrend and as of today, technically we're still in the chop, but as soon as possible, I'd put this in the trend channel and add on any strength.