The equity markets have shown good performance over the past weeks; largely they have stabilized over the past quarter and have returned stable gains.
Out of the three key US Indexex, Dow has been by far the strongest amount the three; Dow has returned 3.72% over the past three months; NASDAQ returned (-9.22%) while the broad market S&P500 index has returned (-2.74%) over the same period.
However, within the broader markets, there are stocks that are showing good technical setups; many of them are showing strong improvement in their relative strength and many are sitting on the cusp of a good sustainable breakout that can offer decent price appreciation over the coming weeks. This food and beverage manufacturer shows a very promising technical setup on the chart.
Kraft Heinz Co (KHC) between 44.25-44.80 between April and May of this year and then slipped under a strong corrective move. The correction that followed saw the price of KHC first slipping below 35 levels and then below 33 levels.
However, between July and November, the price action in KHC led to the formation of an Inverse Head & Shoulders formation. This is a bullish reversal pattern.
This bullish reversal pattern is likely to have more potent implications since it has developed following a corrective move.
The stock is staring at a strong breakout; the On-Balance Volume has already shown the formation of a new high ahead of the actual price breakout. This is a very bullish sign. The stock is presently in the lagging quadrant of the RRG when benchmarked against the broader S&P500 Index. However, the trajectory of the tail is northeast; it implies that it is strongly improving its relative momentum against the broader markets.
RSI too has marked a new high; MACD has crossed above its signal line. The RS line against SPX is rising and presently above its 50-DMA.
If the current technical setup resolves on the expected lines, KHC has the potential to test 43-45 levels over the coming weeks. Any close below 36 would negate this view.
Milan Vaishnav, CMT, MSTA,
Member: (CMT Association, USA | CSTA, Canada | STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)