by Serge Berger | March 17, 2014 8:03 am
The news flow around Keurig Green Mountain (GMCR) has rarely been boring in recent years, since the company is frequently the subject of hot debate regarding its business prospects. That’s still the case today — and since I last discussed the positive posture of GMCR stock following its deal with Coca-Cola (KO), it has consolidated its breakout rally in a constructive manner and still looks to be positioning itself for another push higher.
A week ago, GMCR changed its name to “Keurig Green Mountain” from “Green Mountain Coffee Roasters.” That was followed by Friday’s news that its exclusive agreement with Starbucks (SBUX) concerning high-end K-cups had been readjusted, and that the company entered a new partnership with Peet’s Coffee & Tea.
Separately, it was learned Friday that GMCR stock would be joining the S&P 500 Index, replacing WPX Energy (WPX). According to a statement by S&P Dow Jones Indices, the change is scheduled to take place after the close of trading on March 21.
The parade of news sent GMCR stock to a 6.7% rally Friday, and could be the first sign that shares are ready to resume their latest upswing that started in early February.
From a somewhat longer-term technical point of view, GMCR stock had plenty of reason to take a breather in recent weeks. After all, the early February rally brought shares toward all-time highs from September 2011, which they managed to overshoot marginally … but GMCR likely needs more consolidation time before a better sustainable move past this area stands a chance.
This brings us to the important topic of time frames. It’s critical for an active investor or trader to know what time frames they’re operating in. The weekly chart below shows that GMCR stock is in somewhat neutral territory in the longer-term time frame, bullish but consolidating in the medium-term, and in the immediate term is just bouncing off oversold levels.
On the daily chart, Friday’s rally essentially broke GMCR stock out of what might be considered a bullish flag pattern. Looked at very traditionally, and barring any quick reversal back down, this has the potential to let the stock rise well into the $130s in coming weeks or so.
Quicker traders can thus already consider a long-position right here and right now, which offers clearly defined downside risk around the $104 mark.
Alternatively, the more risk-averse active investor might want to wait another few days or weeks until the stock can show commitment to last Friday’s rally. This might involve a move past $120 and a tighter pattern that could then ultimately move GMCR stock into the $130 area and beyond.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.
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