Tuesday, August 31, 2010

MO Watch

So, a CEO walks into a traders bar and says, "OK, guys, I've got a tip for you. You heard it here first. I've raised my dividend twice this year. I'm gonna do it again." The bar patrons all slam down their drinks and shout, "Sell! Sell! Sell!"

It makes no sense. And it's not even funny. But that's what's happening to the tobacco+otherstuff company Altria Group Inc. (MO), whose dividend was raised a few days back and which today has fallen through the 20-day moving average with bear signs across the board.
MO $22.40

This summer has been good to MO. The price rose 17.7% from a swing low low of $19.53 on June 25 to a swing high of $22.99 on Aug. 17. When earnings were announced on July 21, the price kept on rising.

It was a significant dividend raise, up 8.6%, to a very nice 6.79% annual yield. There's no news to account for the decline. The stock goes ex-dividend on Sept. 13.

MO has been on the rise since hitting a recession low in November 2008. It faltered last may and gave up a few dollars worth of gains before resuming its upward sweep.

It's an uptrending stock with earnings that have increased three quarters running. The present weakness is a mystery.

On the weekly-pivots Person's chart, today's drop brings MO below the midline.

Person's Table
ppspps openupper pivotlower pivot
MO $22.40 $22.45 aug31 $22.86 +2.1% $22.29 -0.5%

MO is trading well above the 200-day moving average.

Reversal Levels
  • $22.99, +2.6% (swing high)
  • $22.60, +0.9% (20-day ma)
  • $22.40 <== You are here.
  • $21.11, -5.8% (recent low)
  • $20.61, -8.0% (200-day ma)
  • $19.53, -12.8% (swing low)
I hate counter-trend trades with a passion. They lose money for me. And with the nice upsweep this stock has shown over the long-term, a bear trade today would be counter-trend with a vengeance. But, the evidence is strong that MO is heading for a correction.

Bottom line: For my account, I wouldn't take this as a bear trade unless it moved below its pre-earnings shelf of $21.11. I would, however, watch it closely for a reversal of signals and try to catch it on the bounce.  

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.
  • sto zone: green for bull phase, red for bear phase.

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