An under-the-radar defensive stock is quietly surging as safety plays make a comeback

As trade war chaos envelops asset classes from stocks to commodities to currencies, defensive corners of the market like consumer staples and utilities have fallen back into favor. Within consumer staples, one name that may fly under the radar for some investors has acted particularly well, catching my eye in recent sessions.

While the staples-tracking XLP ETF has seen a notable gain just in the last month and a half, food and commodities processing company Archer Daniels Midland, one of the XLP’s components, has been climbing upward all year.

Archer Daniels Midland year to date

In fact, the stock has jumped more than 15 percent year to date, and on Wednesday fell modestly to snap its longest daily losing streak of the year.

Where it’s been

In March, shares of Archer Daniels Midland saw an upside breakout of a technical symmetrical triangle pattern, and now stand 23 percent above their November 2017 lows. That’s in contrast to the S&P 500’s rally of 8.8 percent in the same time period.

Now, the stock is bumping up against yet another key resistance level, going back to its 2016 highs. If it can breach those levels to the upside in any meaningful way (it’s already broken slightly above that level), that’s going to mark a significant “higher high.”

That would be very bullish for this defensive stock.

Where it’s going

It’s important to remember, however, that the stock is quite overbought on a near-term basis, as reflected in its relative strength index. Therefore, those 2016 highs may prove to be some kind of short-term resistance that could compel the stock to take a near-term “breather.” In other words, shares of Archer Daniels Midland may have to see a pullback to work off their overbought condition.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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