Shares of specialty packaging company Sealed Air Corp (NYSE:SEE) rallied late last week on the back of improved first-quarter results. Sealed Air has enjoyed a sharp run over the past few years, and as a result of Friday’s move, SEE stock looks like it has moved into a better momentum spot that might trigger another 10% rally.
Sealed Air’s first-quarter earnings came to 46 cents per share, better than the 42 cents expected by analysts. Revenues of $1.746 billion also beat the Street, though just barely, with estimates sitting at $1.74 billion. All told, results improved year-over-year despite an 8% headwind from the strong dollar.
Analysts also are upbeat about the company, with Citigroup having raised its price target on SEE stock before the earnings report, from $46 to $48.
From a price action perspective, SEE stock has very much been a trend-following story in recent years — one that shouldn’t be ignored. That said, while trend following is arguably one of the most lucrative investing/trading strategies, it can also be difficult to execute.
SEE Stock Charts
Looking at the long-term weekly chart of SEE stock, we note that after failing to overcome technical resistance around the $33-$34 area for a long time — 16 years! — Sealed Air finally overcame this level, leading to another 40% rally from October into February.
I often say that when it comes to active investing and trading, the most lucrative trades occur at trend-changing spots (i.e., at the beginning of a new up or down swing) or at the beginning of a trend continuation (after consolidation at the middle of a trend).
On the below chart, we see that good trades were setting up at the bottom of the long-term trading range and on the back of major bullish reversals at the lows in October 2002, February 2009 and July 2012. After the consolidation in SEE stock from spring 2014 until autumn, the breakout breakout past the long-term line of resistance signaled a next entry point to a trade, but this time as part of a trend-continuation play that is still working to this day.
Closer up on the daily chart, we see that so far this year, Sealed Air has found support at its rising 100-day simple moving average (blue line). Most recently in mid-April, SEE shares again held above this moving average as support, then began to rally again on the back of last week’s earnings.
Last week’s two-day rally broke SEE stock out of bull flag consolidation phase that had been in the making since early March. The breakout also pushed the stock back above its 50-day SMA (yellow line) on good volume.
All in all, Sealed Air looks ripe to push into the $51-$52 area over the next few weeks or months.
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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.
