Price bubbles occur with every investment asset
class and fuel ethanol is no exception. The price of fuel ethanol
topped out in late May 2006 at over $4 per gallon, up from under
$1 a few years earlier. Its current price is around $1.80.
Corn, from which ethanol is produced, peaked above $4.20 per bushel
in March and again in June 2007. Currently corn trades around $3.25.
Three ethanol and corn-related stocks developed price bubbles that
were due in part to the bubble in ethanol prices. Archer-Daniels-Midland
(ADM),
a large corn and ethanol processor, peaked simultaneous with ethanol
in May 2006. Other ethanol producers did the same. Deere & Company
(DE),
a large farm equipment manufacture, has enjoyed a multi-year upside
and the stock may have peaked in July 2007. And PotashCorp (POT),
a fertilizer company, may have peaked in early August 2007.
You can get rich from price bubbles if you buy and sell
on the upside. Or you can loose lots of money if you buy at high
prices and do not sell when the bubble collapses. Studying price
patterns will help you analyze bubble formations so you can make
profitable investing decisions.
Related Articles:
Anatomy of a Bubble
Top
Ethanol and
Ethanol-Related Stocks
Farm, Mining
and Construction Equipment Stocks
Fertilizer Stocks
Price Patterns - A
Bubble Top Is an Extreme Pattern
Price Upsides
Often Occur in Three Stages
Rolling Price Bubbles
- Internet, Housing and Commodity Stocks
Posted August 17, 2007.
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