| Stock analysts often give very different recommendations
for a stock - one says to buy while another tells us to sell. Why
do analysts give investors such contradictory information? One reason
is how they interpret a stock's price pattern.
For example, the long-term price chart (starts in 1987) of Archer-Daniels-Midland
(ADM),
the large grain processor and ethanol producer headquartered in
Decatur, Illinois, shows the stock trading near the top of its upside
trend channel (green lines). If you believe that the stock will
move down into the body of the price channel, you could argue that
it is a sell.
However, if you look at a shorter-term price
chart (starts in 2003), you will see that ADM has bounced off the
lower boundary of the price channel indicating there is more upside.
If you believe that the stock will continue to move toward the upper
boundary of the channel, the stock is a buy.
Conflicting conclusions resulting from interpreting different price
patterns is one factor that makes buying and selling stocks difficult
but fascinating.
Click on the blue chart to the right to see more information about
ADM.
Related Articles:
Price Patterns
- Resistance Levels Are Barriers to Price Upsides
Price Upsides
Often Occur in Three Stages
Posted March 31, 2007.
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