Shares of Campbell Soup (CPB) - Get Report are up over 33% in the last 52 weeks -- which wouldn't be bad for a hot biotechnology company and is even better for company that markets processed and packaged foods. The stock price went hyperbolic this year, recently diverging from its 40-week (200-day) moving average by over 20%.
The graph at the top of the weekly chart shows the percent difference between the stock price and its 40-week moving average. That reading is at the highest level since the 2013 high, which was followed by a pullback that took the stock price back below the average. If it were to revert back to the average again, it would mean a 14% decline from its current level, and the case for that bearish scenario may be manifest on the daily chart.
The stock has come off this month's high and is sitting on the 50-day moving average in the $62 area. Daily moving average convergence/divergence is overlaid on a weekly histogram of the oscillator and has been moving in bearish divergence to the stock price for the last month. It looks prepared to move below its centerline on both timeframes. The vortex indicator, which is designed to identify early shifts in trend, is making a negative red-over-green crossover. Chaikin money flow crossed below its 21-period signal average two months ago, continued lower and recently crossed into negative territory. This money flow momentum reflects distribution into this last high in the stock price. The action on the daily timeframe seems to be signaling the start of the potential reversion move seen on the weekly chart.
A long lower candle close below the 50-day average is a short entry point using a trailing percentage buy-to-cover stop.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.