The company missed on both earnings and revenue, causing investors to sell the name Tuesday, with shares closing lower by more than 8%. The decline sends J.M. Smucker headed for multi-year support near $100. The question now is whether it will hold, in light of the company's quarter and amid a volatile period in the stock market.
Earnings of $1.58 per share missed analysts' expectations by 17 cents, while revenue of $1.78 billion came up short by $100 million and declined more than 6% year-over-year.
Worse, management cut its full-year earnings outlook. They now expect earnings in the range of $8.35 to $8.55 per share, below their prior outlook for $8.45 to $8.65 per share. However, the midpoint of management's guidance is in-line with analysts' expectations.
The result is causing some issues on the charts. Let's take a closer look.
Trading J.M. Smucker Stock
Since topping out in May, J.M. Smucker stock has been stuck in a well-defined downtrend channel (blue lines). That is, until Tuesday when it stumbled through support. In doing so, SJM also blew through its 50-week and 100-week moving averages. That's after SJM stock found the 200-week moving average to be resistance over the past few weeks.
In short, it's a bearish setup as key moving averages are acting as resistance while others are failing to act as support. If J.M. Smucker stock can't rally off the lows and reclaim channel support, it's quite likely it will test down into long-time range support between $99 and $100.
Once lost in late 2017, this area acted as resistance for several months. However, short of the fourth quarter meltdown of 2018, this level has held steady on a weekly basis for a long time.
I want to see J.M. Smucker stock test and hold this $100 level. At $100, investors will at least have a reasonable risk/reward for a trade, knowing this level will either act as support or it will fail.
At $100, SJM will yield about 3.5% with its dividend, perhaps attracting some income-oriented investors amid the current low-rate environment. Should it break below $100, then sub-$94 may be on the table.