In our last update on General Mills (GIS) on Jun. 17, we looked for a rally to $70. GIS reached $72 to $73 and now it has been pulling back, or correcting, since early July. Prices are back to a potential support area, so GIS needs to prove itself -- holding nearby support or running the risk of a deeper correction
In this daily chart of GIS, above, we can see that prices have broken the uptrend from the January low, and are below the 50-day simple moving average line. In addition to the trend break, the slope of the 50-day moving average line has turned down this month.
The On-Balance-Volume (OBV) line has crested, which tells me that selling has increased on the decline this month. The Moving Average Convergence Divergence (MACD) oscillator gave a liquidate-longs sell signal in mid-July and an outright sell signal earlier this month, as it moved below the zero line.
In this three-year weekly chart of GIS, above, we can see that prices are still above the rising, 40-week moving average line -- but not by much. The OBV line on this timeframe has been moving sideways over the past two months, indicating that selling has not increased. The MACD oscillator crossed to a liquidate-longs sell signal at the end of August.
GIS is likely to test nearby support in the $64 to $60 area. Weakness to $62 should not be a big issue, but weakness beyond $62 could mean we see $60 -- where another layer of support begins.
Strategy: This is already the deepest pullback that GIS has experienced in some time so traders and investors should be more cautious, and in no rush to be aggressive buyers anytime soon. GIS has not made a multi-month top formation, so we'll give it the benefit of the doubt until proved otherwise.