In our February 11 review of the charts of ag giant Bunge Ltd. (BG) we wrote that, "Traders could look to buy BG on a pullback to the $95 area. Risk to $85. Our first upside price target is the $128 area. Long term, BG could rise to the $300 area or a ten-fold advance from its 2020 nadir."
Traders may or may not have executed that trade successfully but now prices are down in the area of our recommended stop out point.
Meanwhile, sell-side firm raised their fundamental opinion of the agricultural company Friday to an "overweight" rating with a $106 price target. In addition to being a major exporter the company is involved in food processing, grain trading and fertilizer -- businesses we can't do without.
Let's check on the charts and indicators.
In the daily bar chart of BG, below, we can see a price zenith in April followed by a correction. BG has declined back to its December lows and is showing signs of bottoming. Prices are trading below the 50-day and the 200-day moving average lines but we can see that the $85 area is acting as a support zone.
The On-Balance-Volume (OBV) line shows only a modest decline from late April suggesting that the pullback from April has not attracted aggressive selling. The Moving Average Convergence Divergence (MACD) oscillator is below the zero line but has been narrowing towards a possible cover shorts buy signal.
In the weekly Japanese candlestick chart of BG, below, we can see a mixed picture. The shares are in a decline as they trade below the declining 40-week moving average line. The latest candle pattern is a doji with a long lower shadow. This pattern can mark a bottom in price but we need to see some confirmation.
The weekly OBV line shows some weakness into early June and then the start of stability. The MACD oscillator is pointed down but is still above the zero line.
In this daily Point and Figure chart of BG, below, we can see that the shares reached a downside price target in the $86 area.
In this weekly Point and Figure chart of BG, below, we can see a price target of $52. A trade at $94.55 could improve the picture.
In the weekly Japanese candlestick chart of Invesco DB Agriculture Fund (
DBA) , the agriculture ETF, below, we can see a hammer bottom formation waiting for bullish confirmation. The ETF is oversold and near a major support zone in the $19.50-$17.50 area. A rally in the DBA should go hand in hand with strength in BG, in my opinion.
Bottom-line strategy: I do not believe the broader commodity rally we have seen in the past two years is over so I am again recommending the long side of shares of BG at current levels. Risk to $80.
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