Hormel Foods Corp. (HRL) is scheduled to report its earnings numbers Thursday. Looking at the charts and indicators here on Wednesday morning I come away with a bullish view going forward. Let's check our favorite charts and indicators for Hormel, which earned a mention on Jim Cramer's "Mad Money" show last Friday.
In this daily bar chart of HRL, below, we can see that prices doubled in the past 12 months -- not bad. Prices have maintained an uptrend above the rising 200-day moving average line, but around October/November the trend turned sideways. Prices have been moving up and down in a tighter and tighter range (my students at Baruch learned Tuesday night that this was an equilateral triangle) and the level of trading volume has diminished. Prices have crossed above and below the 50-day moving average line.
Despite the level of trading volume shrinking the past three months, the daily On-Balance-Volume (OBV) line has moved in a very positive direction. The OBV line has been rising since late May, but it shows another rise from late December to tell us that traders have been more aggressive buyers of HRL. The OBV line is very close to making a new high and that would lead, I believe, to a new high in the price of HRL. The daily Moving Average Convergence Divergence (MACD) oscillator shows two cover shorts buy signals since the beginning of the year and now has crossed the zero line for an outright go long signal.
In this weekly bar chart of HRL, below, we can see a setup where prices look poised for further gains. HRL is in an uptrend from 2017 and prices are above the rising 40-week moving average line. The weekly OBV line shows a rise the past two months and now it is close to making a new high. A rising OBV line tells us that volume is heavier on days or weeks when prices close higher. The trend-following MACD oscillator is above the zero line and narrowing toward a possible crossover to the upside and new buy signal.
In this Point and Figure chart of HRL, below, we can see that a trade at $44.38 will be a double-top breakout and could open the way to the upside price target that is projected to $49.27.
Bottom line strategy: There are no certainties in investing, but at this point in time it looks like HRL is ready to move higher. Maybe the earnings figures will be the cause. I favor buying strength above $44 and risk below $41 with a $50 price target.
