Campbell Soup Stock Is Cooking

Campbell Soup (CPB) is one to the top five gainers in the S&P 500 Tuesday. The stock is up 3.8% this afternoon and is now well above the October peak. This powerful breakout move extends Campbell's rally off last week's low to over 6%. 

With a very solid base in place, the stock is set up well for more upside.

Ahead of Campbell's Sept. 1 earnings report, the stock was consolidating just above major support near the 200-day moving average. Disappointing fourth-quarter results quickly destroyed this stable action with a huge breakdown gap. Campbell has been steadily drifting lower since then, and by late last month, shares had fallen over 12% from the August close.

During October, Campbell remained in a very narrow range while attempting to finally build a base. As this week began, it was becoming clear that the downside momentum had reached exhaustion and a relief rally was on the way. 

The powerful two-day move off key support near the October/November lows has left behind layers of support. Investors should consider Campbell a buy on weakness now that a solid base is in place.

A dip back down to the $55.25 to $54.50 area, which includes the October high as well as last week's high, would offer a very low-risk entry opportunity. On the downside, a close back below $53 would indicate more work needs to be done before a significant bottom is complete. 

Campbell is scheduled to report its first-quarter earnings results the morning of Nov. 22. 

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This article is commentary by an independent contributor. At the time of publication, the author held no position in the stocks mentioned.

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