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Altria (MO) has been basing just above a major support level since its disappointing earnings report on May 2. MO opened the May 2 session with an ugly downside gap that dropped the stock below the April lows. Despite the considerable damage, MO managed to rebound quickly and has been consolidating above the earnings-inspired spike low. This encouraging action continues as the week comes to an end. For patient investors, a low-risk entry opportunity is developing for this B+ rated stock. 

Altria had an incredible post-election run. At the March peak, the stock had gained 25% from the Nov. 10 lows. This impressive move drove shares well into overbought territory. It was clear a pullback was going to be needed before the rally could continue, but by March 23, the pullback turned into a full-blown breakdown. MO broke below its post-election bull channel that day, sparking a deep selloff. By the open of trade on May 2, shares were down nearly 9% from the March high.

Major support near the 2016 high ($70.15) has been providing solid footing this month. In the near term, MO bulls should consider the stock a low-risk buy near this area. A key upside hurdle is the $71.80 area. Once past this level, the stock will have reached new May highs. On the downside, a close back below May low would indicate more basing is ahead before a fresh rally leg can take hold.    

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At the time of publication, Morrow was long MO.