Campbell Soup (CPB) - Get Report beat earnings estimates before the opening bell on Fri., Aug. 30 and the stock gapped higher to a new 2019 high. The stock has positive daily and weekly charts that favored positive earnings, but the upside appears limited. My call is to book profits up to its semiannual and annual risky levels at $48.68 and $50.25, respectively.
My reasoning includes the fact that the stock is consolidating a longer-term bear market. Shares of Campbell set its all-time intraday high of $67.89 during the week of July 8, 2016 then declined 52% to its Jan. 2, 2019 low of $32.04.
The daily chart shows the stock above a "golden cross" since May 13 and the weekly chart has been positive and its "reversion to the mean" (the 200-week simple moving average) at $49.04 is between its risky levels.
The stock closed Thursday at $43.31 up 27.3% year to date and in bull market territory 35.2% above its Jan. 2 low of $32.04.
Campbell Soup provides canned soups and snacks including Snyder-Lance pretzels and sells products in 120 countries around the world. Campbell is reasonably priced with a P/E ratio of 17.74 and a dividend yield of 3.33%, according to Macrotrends. Here are the details of the earnings results.
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The Daily Chart for Campbell Soup
Courtesy of Refinitiv XENITH
The daily chart for Campbell shows that the stock has been above a "golden cross" since May 13 when the 50-day simple moving average rose above the 200-day simple moving average to indicate that higher prices would follow. Two days ago, the stock held its 50-day SMA at $41.66 as a pre-earnings positive indicator. The stock set its 2019 high of $47.00 on Aug. 30. Today is month end so the close will result in a monthly value or risky level for September. The semiannual and annual risky levels at $48.68 and $50.25, respectively, are above the chart.
The Weekly Chart for Campbell
Courtesy of Refinitiv XENITH
The weekly chart for Campbell is positive but overbought with the stock above its five-week modified moving average of $42.71. The stock is below its 200-week simple moving average or "reversion to the mean" at $49.04, which is between the semiannual and annual risky levels at $48.68 and $50.25. The 12x3x3 weekly slow stochastic reading is projected to end this week at 82.44 moving above the overbought threshold of 80.00.
Trading Strategy: Book profits on strength up to the semiannual and annual risky levels at $48.68 and $50.25, respectively. The quarterly value is below the charts at $29.33.
How to use my value levels and risky levels:
Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31. The original annual level remains in play. The weekly level changes each week. The monthly level was changed at the end of each month, the latest on July 31. The quarterly level was changed at the end of June. My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.