Back toward the end of July 2015, Altria Group (MO) first appeared as a Sunday technical. The long-term chart looked like it had the potential to perform well.
Now, a solid performance by something like MO isn't 30% or 40% in my view. I'd rather see a steady climb with a steady distribution and hopefully shake off some of the market volatility. The trade eventually worked, but the August swoon caused some headaches. Support ultimately held, but MO didn't make its move higher for a few months. In the end, a push from the $53 area to $61 while grabbing a buck and change in distributions isn't half bad, especially given the overall action in the markets.
I see a similar setup as last July, but taking lessons from last July we now have two ways to play this one.
The first is like last July and very simple: buy a weekly close over $61.50. MO has shown a pattern of pushes and flags. We can see it going back to 2014. A push higher, then a flag. Rinse and repeat. The flag seems to correlate to the previous length of the push higher before the flag occurs. If this is indeed the case, then we should expect a push higher to occur in the next two-to-five fives. It's a bit of a range, which brings us to scenario two.
Should MO not break over $61.50 in the next two weeks, then I would look for a retracement back to the $56 area and buy the bounce as long as $56 holds.
I would expect if scenario one is to play out, then the move higher would occur in the next 2-3 weeks, but if scenario two is going to rear its head then 4-5 weeks until breakout would be my expectations. We continue to see strong price action and volume as indicated by the On Balance Volume running above the 21-week simple moving average.
Furthermore, we have a bullish crossover on the MACD. This has been a solid indicator of limited downside (near-term support) and a breakout move higher forthcoming. The trickiest indicator has been momentum as the Relative Strength Index (RSI) hasn't been too helpful. But if we see the RSI move over $72, then we need to watch for a retracement back under $72. That has often been a sign of a short-term pullback forthcoming.
Overall, MO is still a long-term name. Entry into this without a minimum timeframe of six months feels like a waste of time. Use the yield to diversify your holdings or add to this one and maybe consider some out-of-the-money covered calls in the upper $60s set to expire in the late summer if you are comfortable with such an approach. I'm not concerned with whether I see scenario one or two, but as long as I see one of them, this will be a name I intend to acquire and set aside through the summer of 2016 at a minimum.