Since dairy stock Suiza (SZA) has been performing so well, lets see how some other food stocks are doing.
Kellogg Daily Chart
Cereal requires milk, so perhaps Kellogg (K) is doing well. It was until last week. Kellogg dropped 11% before finding support at $28.40. Now the stock is trying to recoup those loses, but has an uphill climb. Resistance around $30.50 will be the big test for Kellogg.
Heinz Daily Chart
Monday I pointed out that Heinz (HNZ), another fine Pennsylvania company, looked like it had found support around $40.75. It has, but hasn't been able bounce very high. The 200-dma could quash the bounce, and if not, resistance looks pretty strong at $43.50. Should Heinz fail at either of those levels, the right shoulder of a head and shoulders top could be forming, with a neckline at $40.75.
Conagra Food Daily Chart
Conagra Food (CAG) also sold off last week, but managed to hold above support at $21.25, the 200 and 50-day moving average, and a two-month up trend. CAG could be forming a tiny head and shoulders top, but climbing above $23.70 would negate that. Of the three, Conagra looks to be the strongest. Jeffrey Canavan
03:00 EST Update
Fund managers have tough decisions in coming weeks
Fund managers as well as individual stock investors will have some tough decisions to make in the coming weeks. The decisions come from tax loss and tax gain selling that may present itself as end of year adjustments occur.
For many mutual funds, their "end of year" accounting is done at the end of October. This gives them time to calculate any long- term and short-term capital gains and losses. This can be important for traders to understand in the coming weeks. Here's why.
That technology stock you've been eyeballing at a new 52-week low, is now the time to step in and buy? One way to answer that question is to put yourself in the shoes of a fund manager that owns that stock at a higher price level and may be looking to offset some capital gains in other part of his/her portfolio. For instance, what if you were a fund manager that owned 1 million shares of Ciena (NASDAQ:CIEN) at $30 and got "stuck" with the stock as it gapped lower to $20. Do you stay the course for the long-term, or sell the stock for a loss to use the capital losses to offset gains? Then at the end of the year, you don't make a distribution to your shareholder in the form of a capital gain. If you think investors are disappointed with the performance of some of their mutual funds, think about the disappointment of seeing a lower net asset value along with a capital gain that they have to pay taxes on!
Ciena Corp. - last nine months
I'm not picking on Ciena (NASDAQ:CIEN) but the chart and time line might help traders/investors understand what I'm talking about in regards to "tax selling." Imagine you are a fund manager that had bought CIEN back in early 2000 at $30/share. Then in January of this year, you decided to sell the bulk of your position for a BIG gain at the $80 level (big capital gain). Then in July of this year, you stepped back in at $30 (it treated you well before at that price level) and now hold the stock at $10? A fund manager that thinks the networking sector is flat for the next three months, might decide to sell the stock for a $20 loss and offset a portion of the $50 gain he/she realized earlier in the year.
Of course, this is all hypothetical. Nobody but the fund manager and perhaps a couple of market makers knows for sure who's a seller and who's a buyer, but I bring this type of "event" to subscribers attention. Just because a stock is trading at 52- week lows doesn't mean the stock won't get sold or experience some sell side activity through the end of the year. It's something to think about before we "load the boat" on a stock in a severe downward trend.
The same could be said for stocks that are trading substantially higher than a fund manager's cost basis. Be careful or at least cognizant of stocks that are trading at or near 52-week high that have shown BIG volume increases near their tops and look to be rolling over. These stocks may be at some distribution levels. One tool that we've been teaching subscriber to use is the "vertical count" using the point and figure charting system. If your looking at strong stocks that have substantial gains in them, but trade near their bullish price objective, be alert to the possibility that that stock may see some distribution to generate a gain that may be used to offset a loss.
So what do I look for to buy?
How about a stock that is breaking out of a base where it's trading just about breakeven? Think about a fund manager that owns the stock and finally, the silly thing is starting to show the performance your original research "told you" was going to come. Do you sell that stock that is just starting to perform? Probably not. Then if I can sell a loss (raise cash) and sell a big gain (raise cash) I might actually rotate some of that cash into the stock that is just starting to break out of a longer- term base.
Something to think about at least and we can try and uncover in some chart patterns.