Casey's General Stores Beats Earnings Estimates, but Shares Slip

Casey's General Stores, Inc. (CASY) is a chain of Midwest convenience stores in 16 states. The retailer beat earnings estimates, but the stock stalled and slipped slightly. The stock is trading above its monthly value level at $162.35 but below its all-time intraday high of $173.31 set on Aug. 20.

The stock has been above a "golden cross" on its daily chart since Aug. 31, 2018, and its weekly chart is positive but overbought. However, its weekly slow stochastic reading is above 90.00 on a scale of 00.00 to 100.00, making the stock an "inflating parabolic bubble," and bubbles always pop.

The stock closed Wednesday, Sept. 11, at $166.58, up 30% year to date and in bull market territory at 43.3% above its Dec. 11 low of $116.23. The stock is just 3.9% below its all-time intraday high. Casey's General Stores stock is not cheap, as its P/E ratio is elevated at 28.71 with a dividend yield of just 0.75%, according to Macrotrends.

This retailer offers both fuel and food services. Same-store fuel gallons declined by 2%. Food and fountain sales were up 1.6%, which was below expectations. The diversified retailer is in a program to better control operating expenses.

The daily chart for Casey's General Stores

The daily chart for Casey's General Stores shows that the stock above a "golden cross" since Aug. 31, 2018, when the 50-day simple moving average rose above the 200-day simple moving average, indicating that higher levels lie ahead. There was a buying opportunity at the 200-day moving average at $128.12 on May 31, 2019. The signal was in play when the stock set its all-time intraday high of $173.31 on Aug. 20.

The horizontal lines are monthly, semiannual, annual, and quarterly value levels at $162.35, $156.50, $151.43, and $144.94, respectively. This week's risky level is above the chart at $174.80.

The weekly chart for Casey's General Stores

The weekly chart for Casey's General Stores is positive but overbought, with the stock above its five-week modified moving average of $165.36 and above the 200-week simple moving average, or "reversion to the mean," at $120.62. The "reversion to the mean" was last tested at $108.06 during the week of July 27, 2018.

The 12 x 3 x 3 weekly slow stochastic reading is projected to decline to 88.22 this week, down from 91.71 on Sept. 6. At the August high, this reading was 95.44, well above the 90.00 threshold as an "inflating parabolic bubble," and bubbles always pop.

Trading strategy: Buy Casey's General Stores on weakness to the monthly and semiannual value levels at $162.35 and $156.50, respectively, and reduce holdings on strength to the weekly risky level at $174.80.

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 annual level remains in play. The weekly level changes each week. The monthly level changes at the end of each month, most recently on Aug. 30. The quarterly level was changed at the end of June.

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. Recently, I noted that stocks tend to peak and decline 10% to 20% and more shortly after a reading rises above 90.00, so I call that an "inflating parabolic bubble," as a bubble always pops. I also refer to a reading below 10.00 as "too cheap to ignore."

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.