J.M. Smucker turned up on several bullish scans late Thursday, both short term and long term. When you look at the charts, you'll quickly see why I share that optimism. Right now, everything about Smucker's daily chart is bullish except for the price. Some may take "except for the price" as a negative, but it's not. What that means is that a slew of indicators have turned bullish before the price pattern, which is a type of bullish divergence.
Momentum and trend are both bullish with Smucker's, as demonstrated by the longer 14-period RSI well above 50, the MACD crossing over bullishly here and the Ultimate Oscillator above 50 as well. That last measure is a momentum indicator that melds together shorter-, medium- and longer-term moving averages, taking into account buying pressure along with a stock's True Range. Notice that on SJM, the stock has avoided any significant correction as long as the Ultimate Oscillator has remained over 50.
As far as price goes, yesterday's close could be seen as a breakout from the recent trading channel, depending on how you draw your resistance line. My view would be to play this conservatively and use the line I have on the chart here. That means we need to see just a little more upside -- just a quarter or so -- to trigger a price breakout. Support is just above $114, and a close under $114 should be hedged on the long side or even closed, as the next level would be $108. The upside here is $122 minimally, but I would be looking for something more along the lines of the high $120s before additional consolidation.
The high $120s seem more reasonable when we look at the weekly chart. Before you get excited about that last big green candle on the chart, please understand I put the candle on there for target purposes. The weekly chart has a small but viable cup-and-handle pattern that formed after the stock's big push higher in February. The cup and handle is a continuation pattern, so it makes some sense here. The biggest issue with the pattern is that the push higher came quickly, while the consolidation has formed over a much-longer time period. Still, if this breakout takes hold, I would expect upside similar to the long green candle that kicked off February's trading.
There's nothing on the technical front that makes me doubt this bullish stance at the moment. The full stochastics, used to give me a look at both shorter- and longer-term relative price action, are a bit overheated, but SJM has performed best when they reach and maintain their current levels. The accumulation/depreciation line is moving pretty much in line with price, so that's a confirmation (although nothing more at the moment). The force index is declining but still bullish, as one would expect during a consolidation period after a bullish move. Lastly, RSI demonstrates momentum is still strong here.
If we close higher or even unchanged today, we'll get all of the bullish triggers that we want to see: price, volume, trend and momentum.
While I'm not a buyer yet, I will be near today's close should SJM finish at $118.50 or higher. I'll consider a half-size position if the stock closes flat, simply based on the weekly chart. The use of $115 calls here (preferably July, but perhaps June), would be an attractive risk/reward to limit the use of capital and build in the concept of the $114 stopping point. That will be my approach.
Editor's Note: This article was originally published at 11:10 a.m. EDT on Real Money on May 15.