Kraft Heinz Co. (KHC) opened flat here on Tuesday morning as Warren Buffett said the biggest problem facing Kraft Heinz is that Heinz overpaid when merging with Kraft in July 2015. The deal was agreed to by Buffett's Berkshire Hathaway (BRK.B) and 3G, which jointly owned Heinz at that time. The charts of KHC (below) show that Buffett could have made this statement at any time in the last four years and certainly since early 2017, when the trend turned bearish. Maybe Warren should look at the charts in addition to the balance sheet and income statements. Just saying. Let's take a few minutes to do just that.
In this daily bar chart of KHC, below, we can see that prices have been under selling pressure/liquidation the past 12 months. Prices are below the declining 200-day moving average line and are testing the declining 50-day average line. After making a new low for the move down in late May and nearly reaching a Point and Figure target of $25, KHC has firmed a little this month. The On-Balance-Volume (OBV) line has shown a little improvement and the Moving Average Convergence Divergence (MACD) oscillator is close to crossing the zero line from below. This would be an outright go-long signal for the shares should it happen.
In this weekly bar chart of KHC, below, we can see that prices have made a serious decline since early 2017. The 40-week moving average line has been in a negative pattern since the middle of 2017. The weekly OBV line shows a long decline to late May and a recent bounce. The MACD oscillator has given a cover-shorts buy signal but is a long way below the zero line and an outright buy signal.
In this Point and Figure chart of KHC, below, we can see part of the long decline and that prices have overshot a $30 price target.
Bottom line strategy: Bearish news often comes out at a bottom. I am not saying that KHC has bottomed or that it is a buy, but it will be interesting to see how the stock behaves from here.
