If the stock does not sustain its post-earnings price gains, it faces a death cross on its daily chart. On its weekly chart the stock is below its 200-week simple moving average, or reversion to the mean, at $54.31.
My call is to sell strength to its monthly and semiannual risky levels at $53.35 and $53.99.
A reason for concern about the Minneapolis company is flat sales at convenience stores and a year-over-year decline of 5% in Europe, Australia, Asia and Latin America.
The stock closed Tuesday at $52.17, up 34% year to date and in bull-market territory 43% above its Dec. 17, 2018, low of $36.42.
Longer term, the stock is consolidating a bear-market decline of 50% from its all-time intraday high of $72.95 to its Dec. 17, 2018, low of $36.42.
When you see this type of stock-specific volatility, you know that several technical signals have called either “buy on weakness” or “sell on strength.” Therefore, it’s important for traders and investors to learn how to use my algorithms.
General Mills is fundamentally cheap, with a p/e multiple of 15.87 and a dividend yield of 3.74%, according to Macrotrends.
The Daily Chart for General Mills
Courtesy of Refinitiv XENITH
The daily chart for General Mills shows the formation of a golden cross on March 12. A golden cross occurs when the 50-day simple moving average trends above its 200-day SMA, indicating that higher prices lie ahead. This positive signal tracked the stock to its 2019 high of $56.40 on Sept. 9.
If the stock fails to hold its 200-day SMA at $52.41, a death cross will be confirmed, as the 50-day SMA slides below the 200-day SMA. That indicates that lower prices will follow into 2020.
Note that the stock failed at its semiannual pivot at $53.99 on Dec. 6. Also note that the positive reaction to earnings failed below its monthly pivot for December at $53.35.
The Weekly Chart for General Mills
Courtesy of Refinitiv XENITH
The weekly chart for General Mills is positive, with the stock just above its five-week modified moving average of $52.70.
The stock is below its 200-week simple moving average, or reversion to the mean, at $54.31, which was a ceiling between the weeks of Aug. 6 and Oct. 18.
The 12x3x3 weekly slow stochastic reading is projected to rise to 44.29 this week from 43.66 on Dec. 13. It’s a close call, but a close on Friday below $52.70 will likely cause a downgrade to a negative weekly chart.
Trading Strategy: Reduce holdings on strength to the monthly and semiannual risky levels at $53.35 and $53.99, respectively, and to the 200-week simple moving average at $54.31 into 2020.
How to use my value levels and risky levels:
Value levels and risky levels are based upon the past nine monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31, 2018. The original annual level remains in play.
The close at the end of June 2019 established new monthly, quarterly and semiannual levels. The semiannual level for the second half of 2019 remains in play.
The quarterly level changes after the end of each quarter, so the close on Sept. 30 established the level for the fourth quarter.
The close on Nov. 29 established the monthly level for December.
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.