Conagra Brands, Inc. (CAG) makes processed and packaged foods for grocery stores. The stock closed Tuesday, June 25, at $28.89, up 35.3% year to date and in bull market territory at 43.2% above its Dec. 26 low of $20.22. The stock is 7.7% below its 2019 high of $31.29 set on April 24.

Analysts expect Conagra to report earnings per share (EPS) of 42 cents when the company releases results before the opening bell on Thursday, June 27. The stock is reasonably priced with a P/E ratio of 13.07 and dividend yield of 3.02%, according to Macrotrends. The company missed EPS estimates back on Sept. 27, which fueled a bear market for the stock.

Conagra stock set its 52-week high of $38.43 on Sept. 14, and then came the earnings miss on Set. 27, which resulted in a price gap lower. The stock declined by a bear market 47% to a low of $20.22 on Dec. 26. This marked a turnaround for the stock.

Conagra purchased Pinnacle Foods in October, which should provide longer-term benefits – particularly in frozen foods. Angie's Artisan Treats adds to Conagra's line of snack foods. In a stronger economy, more edibles are delivered to restaurants under its Foodservice segment. The company also provides Commercial Foods under private-label agreements.

The daily chart for Conagra

Daily chart showing the share price performance of Conagra Brands, Inc. (CAG)
Refinitiv XENITH

The daily chart for Conagra shows that the stock was influenced by a "death cross" that formed on Aug. 23, when the 50-day simple moving average declined below the 200-day simple moving average to indicate that lower prices would follow. This tracked the stock to its Dec. 26 low of $20.22.

The Dec. 31 close of $21.36 was an important input to my proprietary analytics. The annual risky level remains at $38.14. The second quarter value level is $24.24. Note how the stock has been sliding down its 200-day simple moving average since April 22, with the average now at $28.85.

The weekly chart for Conagra

Weekly chart showing the share price performance of Conagra Brands, Inc. (CAG)
Refinitiv XENITH

The weekly chart for Conagra will be negative if the stock closes on Friday below its five-week modified moving average of $28.79. The stock is well below its 200-week simple moving average, or "reversion to the mean," at $34.40. Note how the stock had been below the "reversion to the mean” since the week of Nov. 16.

The 12 x 3 x 3 weekly slow stochastic reading is projected to decline to 65.56 this week, up from 69.89 on June 21. At the low at the end of December, this measure was at 8.81, with the reading below 10.00 making the stock "too cheap to ignore." Then, at the 2019 high, the reading was 90.40, with the level above 90 making the stock an "inflating parabolic bubble."

Trading strategy: Buy Conagra stock on weakness to its quarterly value level at $24.24 and reduce holdings on strength to its 200-week simple moving average at $34.40 and its annual risky level at $38.14.

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 changed at the end of each month. 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.

The close on June 28 will be the second most important for 2019 in terms of my analysis. This close is an input to my proprietary analytics and will generate new weekly, monthly, quarterly, and semiannual levels.

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.