In his first Executive Decision segment of "Mad Money" Tuesday, Jim Cramer spoke with Sean Connolly, president and CEO of Conagra Brands Inc. (CAG) , the packaged foods maker that just posted a fourth-quarter earnings beat.
Connolly said consumers aren't just stocking their pantries, they're rediscovering the joys and values of eating at home with their families. People are rediscovering the brands of Conagra. Among the standouts this quarter was a 62% increase in Chef Boyardee; Duncan Hines was also strong as millennials and Gen-X consumers rediscovered baking at home.
Connolly said frozen foods are the perfect foods for this environment, as they are restaurant quality but still easy to prepare.
Let's prepare a few easy charts to analyze Conagra shares.
In this daily bar chart of CAG, below, we can see how prices have performed the past 12 months. CAG shows a peak back in December and a low with the broad market in the middle of March. Prices recovered back to the December high and made a new high for the move up on Tuesday. Prices are above the rising 50-day moving average line and the bullish 200-day moving average line.
The trading volume increased in March but was not really heavy. The On-Balance-Volume (OBV) line shows a decline into late March and then a modest recovery before weakening in June. The Moving Average Convergence Divergence (MACD) oscillator has been holding just above the zero line in recent weeks. Fresh highs on CAG should improve this indicator.
In this weekly bar chart of CAG, below, we can see that prices have advanced to a potential area of resistance. CAG traded sideways in the $36-$40 in 2018 before plunging to around $22. Now that prices are finally back to this zone we could see old longs look to get even and become sellers. The indicators suggest that prices could push up through this potential resistance. Prices are above the rising 40-week moving average line. The weekly OBV line is more constructive-looking than the daily line. The MACD oscillator is in a bullish alignment.
In this first Point and Figure chart of CAG, below, we used daily price data and here we can see an upside breakout at $35.31. A $39 price target is shown, which if reached would mean the resistance has been largely overcome.
In this second Point and Figure chart of CAG, below, we used weekly close-only data with a traditional even-dollar increment. Here the chart suggests the $55 area as a longer-term price objective.
Bottom line strategy: In full disclosure my late mother was a working mom and Chef Boyardee became a trusted comfort food for me in the 1950s and '60s (so did TV dinners). It still is today. CAG has traded sideways for three months before Tuesday's upside move. Further gains look likely. Aggressive traders could go long CAG here, risking a close below $32 for now. The price targets are $39 and then $55.
