Wednesday, October 12, 2011

GMCR Watch

Green Mountain Coffee Roasters Inc. (GMCR) has reversed sharply, traversing 7.8% to the downside so far in today's trading.

sym phase trend adx   200/50 40/10

The reversal came as the price hit the upper boundary of a downtrending price channel that began Sept. 20, and also the ceiling of a sideways trend that began in late July.

The lower boundary of the channel is at $81.85, or 8.3% below the current price.

An upward bounce off of around $83.50 would confirm that GMCR is continuing its sideways trend.

The Sept. 20 high of $115.98 ended an 18-month run-up that made GMCR a favorite of trend followers. But how the mighty are fallen. The stock is trading at August levels, 23% below the peak. Despite a reasonably high return on equity -- 18% -- and a not-awful debt/equity ratio -- 0.23 -- GMCR has dropped in status to a mere sidewinder with aspirations to beardom.

Insitutional ownership remains around 80% -- OK but not outstanding.

I'm neutral in assessing the outlook of the stock.

However, it makes a decent swing trade. The price has touched the ceiling and the floor twice each. The swing range is relatively large -- about $32.50, or 36% of the current price. That gives lots of room for profit.

However, a reservation. The price last touched the sideways trend floor a mere seven days ago and has not subsequently come close to the ceilng. Today's drop most likely is a smaller retracement that will either provide a double bounce off the sideways trend's lower boundary or will punch through, breaking the trend entirely.


  • phase: 20-day price channel phase, with green for bull trend, red for bear trend and yellow for neutral trend.
  • trend: Price direction, green for higher highs and higher lows, red for lower highs and lower lows, yellow for sideways, and grey for neutral or ambiguous.
  • adx: Average directional index location, indicating the strength, or the temperature, of the trend. Orange for 40 or greater, aqua (light blue) for 25 and up but below 40, magenta (light purple) for 20 and up but below 25, and brown for anything below 20. (Mnemonic: Orange for the overhead sun, blue for the surrounding sky, magenta for sunset on the horizon and brown for the earth.)
  • 200/50: The moving average cross, green for the 50-day ma above the 200, red for below and yellow for closely aligned.
  • 40/10: The moving average cross, green for the 10-day ma above the 40, red for below and yellow for closely aligned.

About my trading methods

Read a detailed explanation of my analysis method, including trading rules.


Tim Bovee, Private Trader tracks the analysis and 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.

The trader’s greatest sin is inaction. Sleeper, awake! Seize the Nietzchean moment. Roll out of bed and trade.

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