Thursday, August 12, 2010

GIS Watch

The food products maker General Mills Inc. (GIS) is trading around 1.6% above Wednesday's close on a switch to bull phase by the macd and Person's Proprietary Signal, a good trick when most of the market is pausing from yesterday's steep decline.

GIS $34.36

Oh, and GIS missed the big decline as well. It simply held steady amid the general mini-collapse.

The fast stochastic, volatile as always, turned to bull phase three days ago.

This is something of a news-contrarian move. Wheat prices are up bigtime, and wheat is a major component of GIS's products. Reuters moved a happy talk story about the Big Food sector riding it out, but the straightforward analysis says:

Higher prices for the raw materials equals either lower privates or higher prices in the stores. In tough times like these, price increases to consumers are a bit risky.

In any case, the GIS stock chart is doing the happy dance, and our job as traders is to see just how happy it really is from the standpoint of technical analysis.

The stock traded sideways for three days before today's bump up. The price has risen 2.7% intraday (so far) and remains 2% below the 20-day simple moving average.

On the three-month chart, the stock has been in a downtrend since June 18 and hit bottom on Aug. 6.

Longer term, the stock has been in an uptrend for 20 years, with a steep recession pullback that stayed well above any lower low that then pushed to June's higher high.

On the Person's chart, today's move sent the price blasting above the midline toward the upper pivot.

Person's Table
ppspps openupper pivotlower pivot
GIS $34.36 $33.61 aug12 $34.70 +1.0% $32.78 -4.6%

Reversal Levels
  • $38.98, +13.5% (June high)
  • $36.39, +5.9% (200-day ma)
  • $35.11, +2.2% (20-day ma)
  • $34.36 <== You are here.
  • $33.11, -3.6%
Bottom line: I like GIS as a bull play because that would be with the greater trend. I would have more confidence if the price were to move above the 20-day moving average at $35.11, and even more if it were above the 200-day exponential moving average at $36.39. And of course total confidence if it moved above the June high of $38.98.

With a 20-year rise behind, I would treat GIS as a long-term play. The stock also pays a quarterly dividend with a 3.26% annual yield. A very nice kicker for a long-term stock holding.

Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment. No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
  • psar - Parabolic Stop and Reverse
  • adx - Average Directional Index
  • pps - Person's Proprietary Signal
  • ma20 - 20-day moving average
  • macd - Moving Average Convergence-Divergence
  • sto - Fast Stochastic
About the glance: The colors indicate the state of each signal.
  • trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
  • adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
  • psar, pps, macd: green for bull mode, red for bear
  • sto: green for overbought, red for oversold, yellow for the neutral zone.

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