
Rally Is Brewing in Keurig Green Mountain Stock, Technical Charts Show
NEW YORK (TheStreet) -- It's rare, but not impossible, to find companies that are poised to make large moves in the opposite direction of the general market. Luckily, the decision support engine's algorithms are always searching for price lows at several degrees of trend while simultaneously searching for price peaks at several degrees of trend. This allows the opportunity for both buying and selling actions to be available in most market environments, as long as you don't get caught up in only seeing the forest, while ignoring a unique tree.
Keurig Green Mountain (GMCR) is just such an opportunity. The monthly bar chart below shows why the recent test of the $45 level was the likely end of the entire correction off the 2014 peak near $157. (The stock crashed 71% in less than a year.) The first indicator that catches one's eye is the enormous bearish divergence sell signal that occurred from the 2011 to 2014 higher highs in price while there were lower highs in stochastics. However, that sell signal has been completely neutralized by the year-long destruction in price, as well as shareholder support.
Although the decision support engine can't yet eliminate the potential for the lower green box to be probed in the middle of 2016, such a probe is not required to complete the corrective action from the all-time high. In fact, the stochastics now signal a huge buying opportunity in the $45 +/-$10 zone, where price just recently exited. Any further testing of that zone would only serve to allow the crowd to grab more coffee exposure, as the upside forecast from the decision support engine is illustrated by the blue arrows, which point to the $100 area.
Not only have the monthly stochastics crossed up and out of the extreme oversold 10% threshold, but the weekly and daily chart stochastics (not shown) recently have as well. This portends several weeks to months of upward price behavior, based on historical chart pattern recognition, which is another of the decision support engine's hunt-and-seek algorithms.
When we see multiple components of the decision support engine independently trigger a buy or sell signal, confidence in the big-picture forecast rises. But, when these signals combine in rare extremes, it's time to light the candles and put on the party hats. As seen here, when the stochastics reach the oversold extremes that were seen at the August and 2012 lows at the same time that price is testing the lower two-standard-deviation band (which includes 95% of normality), the decision support engine will give a strong signal. That is exactly what happened when Keurig Green Mountain plummeted to $45 last month, probing below the lower two-standard-deviation band, then reversed to close the monthly bar back above that band.
Therefore, when we ask the objective decision support question, "If I had no money in Green Mountain at this time, would buying or selling actions be indicated?", the answer comes back as a resounding buying actions only! Investors, traders and speculators should be using buying actions to exit short exposure, if they still have any, either using buy stops at $63 (50-day moving average) or using limit orders near $53. If they're flat, they should establish long exposure using these same parameters, and if they're long, they should maintain exposure and add to it in the $50 +/-$3 zone, or use buy stops at $63. In fact, a great spread trade, or risk arbitrage, would entail exiting long exposure in Starbucks (SBUX) - Get Report and going long Keurig Green Mountain.
Above is the monthly coffee futures chart to show why the right stock exposure to this commodity makes sense. Here again, the bearish divergence sell signal occurred as the 2014 higher highs in price went unconfirmed by the lower highs in stochastics, and the price fell in half into the lows coffee is now experiencing. These price lows are above those of 2013, however, while the stochastics lows are lower, setting up a bullish divergence buy signal, which is also in place in the Keurig Green Mountain chart.
For now, Keurig Green Mountain suggests taking the time to smell the coffee beans, with exposure to Keurig Green Mountain and/or coffee itself.
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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.










