Also in the four bagger club in the current rally, this stock is on a lot more radar screens than other stocks recently discussed because of its spectacular advances, featuring an explosive gap up on 4/20.
This stock has not formed a buyable pattern and thus might not provide the explosive move of stocks that have either corrected for longer periods or in a tighter fashion. Still, price has rebounded off the 50 MA marking the first touch of this line in four months.
Volume is light today, which does not auger for an immediate move, but two things stand out this morning. First, price is edging above the trend line connecting the highs of the correction. And Stifel reiterated their SELL rating on the stock, which has reacted by trading higher.
In spite of myriad technical caveats listed above we’d be buyers on a volume move over this trend line, whenever it should occur.
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We’ve had a number of stocks qualify for 8 week hold status. GMCR is not one of our stronger performers and hasn’t qualified, advancing only 16% to its peak out of a second stage base.
ReplyDeleteThe recent weakness in the stock was foreshadowed by the resistance it repeatedly hit at $72 and the wild trading that accompanied its recent ride.
When earnings were released the stock sold off sharply but rebounded to 52 week highs at $72, a bullish sign. But price closed off its peak. The following day price was again rejected at the $72 level and then gapped down the following day on news of a stock offering.
Price quickly found support and the when the offering priced price again tested the $72 level only to fail for a third time. For those with a shorter term time horizon this was a clear sign to take profits ahead of an inevitable pullback. When price finds repeated resistance or support a move in the opposite direction is almost technically guarnteed.
We didn’t advise selling because the weekly was quite promising. In spite of the wild trading on the daily and resistance at $72 price had closed tightly for three consecutive weeks. We felt weakness would find support.
GMCR has now fallen every day this week on lighter than average volume, meaning that institutional money is not abandoning the stock. Yesterday price put in a “hanging man” candlestick, indicating that we have likely seen the lows of the pullback unless the market uptrend abruptly ends.
We’re not interested in buying more of this stock. We buy strength or constructive weakness and add to stocks that are outperformers. GMCR simply doesn’t qualify.
That doesn’t mean we’re abandoning the stock. We’re keenly interested in watching the rebound. How it reacts on the price move higher will determine its fate in our portfolio. We’re going to need to see buying interest on the way higher and an eventual move over the $72 level to new highs.
GMCR continued lower today but it bounced nicely off its 50 MA. We should get the much anticipated reversal now although we are not pleased that a two day reversal set up from Wednesday and Thursday was violated today.
ReplyDeleteThat set up consisted of a "hanging man" candlestick followed by a "doji like" one. Both are indicators that momentum in the stock is changing and that a reversal is imminent. That price sank even lower today is a sign of a lack of leadership capabilities in the stock.
As we commented earlier, however, we will await final judgment until we can gauge the quality of the impending reversal.