Campbell Soup Company (CPB) beat earnings estimates on June 5, and the stock spiked higher. The daily chart shows the stock above a "golden cross," which is a positive signal. The weekly chart will likely shift to positive this week.
The stock closed Monday, June 10, at $42.01, up 27.3% year to date and in bull market territory at 31.1% above its Jan. 2 low of $32.04. The stock set its 2019 high of $43.66 on June 7.
Campbell Soup provides canned soups and related products in 120 countries around the world. The company is experiencing a resurgence in demand for its line of snacks including Snyder-Lance, known for pretzels. Campbell stock is reasonably priced with a P/E ratio of 18.18 and a dividend yield of 3.33%, according to Macrotrends.
The daily chart for Campbell Soup
The daily chart for Campbell shows that the stock has been above a "golden cross" since May 11, when the 50-day simple moving average rose above the 200-day simple moving average to indicate that higher prices would follow. The stock began June moving above its monthly pivot for June at $36.81. The stock set its 2019 high of $43.66 on June 7. Its quarterly value level is below the chart at $26.50. Its annual and semiannual risky levels are $50.25 and $52.44, respectively.
The weekly chart for Campbell
The weekly chart for Campbell will shift to positive if the stock ends this week above its five-week modified moving average of $39.58. The stock is below its 200-week simple moving average, or "reversion to the mean," at $49.48. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week at 66.16, up from 65.38 on June 7.
Trading strategy: Buy Campbell shares on weakness to the monthly value level at $36.81 and reduce holdings on strength to the "reversion to the mean" at $49.48.
How to use my value levels and risky levels: Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual, and annual closes. The first set of levels was based upon the closes on Dec. 31. The original semiannual and annual levels remain in play. The weekly level changes each week; the monthly level was changed at the end of each month. The May 31 close set the key level for June. The quarterly level was changed at the end of March.
My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.
How to use 12 x 3 x 3 weekly slow stochastic readings: My choice of using 12 x 3 x 3 weekly slow stochastic readings was based upon backtesting many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.
The stochastic reading covers the last 12 weeks of highs, lows, and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading, and I found that the slow reading worked the best. The stochastic reading scales between 00.00 and 100.00, with readings above 80.00 considered overbought and readings below 20.00 considered oversold.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.