Short the Biotechs and Ag Stocks

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PowerShares DB Agriculture ETF (DBA) -- Daily eSignal

The PowerShares DB Agriculture (DBA Quote) ETF sold off from $43.50 to $21.50 last year and then bounced into January. That recovery marked the high for 2009, with the fund grinding lower since that time in a lazy decline. It's now probing a seven-week low, and despite upbeat accumulation appears headed into a test of its bear-market low.

Rather than sell short the fund directly, look at components that show more favorable reward-to-risk profiles. These include Monsanto (MON Quote), Compass Minerals (CMP Quote) and Archer Daniels Midland (ADM Quote). I'd avoid sector stocks involved in takeover and acquisition activity, like Agrium (AGU Quote), CF Industries (CF Quote) and Terra Industries (TRA Quote).

Archer Daniels Midland (ADM) -- Daily eSignal

Archer Daniels Midland in particular looks like a promising short sale after its three-month battle at the 200-day moving average. The stock hit that resistance in December and now shows eight failed tests at this formidable barrier. Downside momentum is accelerating, with price dropping toward key support at the January swing low.

A breakdown from that level should trigger a decline that drops the stock toward its bear-market low at $13.53. Notably, this is a relatively slow mover in the agricultural group, so a downtrend might take several months to unfold. That makes this issue an interesting choice as a short hedge in a long-weighted portfolio.