Traders and investors are grateful for many things this U.S. Thanksgiving holiday, including a rising stock market and lower volatility levels. Indeed, this year's festivities feel a whole lot better than in 2008, when everyone was dead certain the world was coming to an end.
We should all reflect on the good things in life as we sit down at our holiday tables, including family, friends and financial stability. But we can also do a little homework, because the cornucopia of foods sitting there for our enjoyment were caught, processed and distributed by companies that are ticking higher in strong bull market advances. It's amazing but true that food stocks are acting better than tech stocks these days, in response to a slow-growth environment that favors defense over speculation. These Steady Eddies of the financial world are attracting tons of cash from cautious investors who have seen their nest eggs grow, get robbed and grow again, all in the space of three years.
Coca-Cola is a case in point. The soft-drink giant sold off from $65 to $37 in the bear market, bottoming out in March and ticking higher in a steady recovery. The stock finally completed a 100 per cent round-trip to the September 2008 swing high last month, paused for a few weeks and then broke out. It's now trading at a 17-month high.
The uptrend probably won't quit until price reaches the nine-year high at $65.59, posted in January 2008. This train has left the station, and I don't recommended chasing it to higher ground. However, defensive stocks tend to pull back whenever there's a surge in risk appetite, so a decline could reach support at around $55, which would mark an excellent entry price.
Food stocks were very popular in the summer of 2008, when investors didn't realize that the bottom was about to drop out of the credit markets. H.J. Heinz hit a nine-year high at that time and then turned tail with the broad market. The can and ketchup king finally bottomed out at a five-year low near $30 in March.
The stock has recovered steadily in the last eight months and has now regained about half of its lost value. Note the gap and upside channel break that was triggered in Monday's rally. A long position near $43, with a stop loss under new support, looks like a good play ahead of a continued rally into the upper $40s.
Dr Pepper Snapple Group rallied above its May 2008 initial public offering in August and hit an all-time high near $31. The uptick then gave way to a steady pullback that found support near the 50-day moving average about four weeks ago. The stock has been grinding sideways since that time, marking out obvious resistance at $28.20.
A breakout over that price level should reactivate the uptrend and yield a test of the rally high. This is a good pattern for traders and investors alike, because traders can sell into that test for a decent profit while investors hang tough for a continued advance that might reach the mid-$30s in the first quarter of 2010.
Constellation Brands sells the wine and spirits that make the holiday season extra happy. The stock hit a recovery high at $17 in January, after a steep bear market decline. Price pulled back and tested the 2008 low through May and finally lifted higher. It reached the January swing high last month, pulled back and returned to that resistance level last week.
The stock finally broke out on Monday and is now trading at a 13-month high. This is a relatively slow mover, so it isn't too late to get on board, ahead of an uptrend that might reach $20 in the next few months. That target might not offer enough reward potential for some readers, but consider that low volatility also lets you sleep at night.
Sanderson Farms is the fourth-largest poultry producer in the country. I especially like these folks because they don't pump their chickens with sodium and water. The stock has taken an interesting journey in the last four years, held back by resistance near $50. It last hit that level in June, ahead of a pullback into the mid-$30s.
Things could get interesting for this issue as we head toward 2010. It's been basing near the 200-day moving average for the last four months and could be ready to head into another test at resistance. That uptick might complete a multiyear breakout pattern that finally lifts price above $50 and into the all-time high near $55.