Skip to main content

General Mills Gets Mushy in the Investing Bowl

The cereal maker's stock is still in a downtrend.
Comments

We reviewed the weak charts of General Mills (GIS) at the beginning of June and did not find any reason to recommend the long side. Unfortunately for investors, prices have sunk still lower. The Point and Figure chart we consulted in June gave a $49 downside price target and we are not too far off that mark.

Can GIS stabilize here or will we sink still lower? Let's see what has transpired in the past four months and see what strategy now makes sense.

Image placeholder title

In this daily bar chart of GIS, above, we can see a sideways trend from October to February followed by a decline or downtrend. Prices are below the declining 50-day moving average line and the downward-sloping 200-day line. The daily On-Balance-Volume (OBV) line has been diverging from the price action since May. Prices have made lower lows but the OBV has not made a lower low since April/May. The OBV turned down again in late August and it could eventually make a new low to confirm the bear trend. While the OBV line is diverging from the price action, the 12-day momentum study is not diverging. Momentum has made lower lows from late June to October.

Image placeholder title

In this weekly chart, above, we can see the downtrend in the price of GIS has been an ongoing affair since July 2016. Prices are below the declining 40-week moving average line. The weekly OBV line peaked with prices in July and has recovered slightly the past three months. The trend-following Moving Average Convergence Divergence (MACD) oscillator has been below the zero line since last October.

Image placeholder title

This Point and Figure chart of GIS, above, shows a downside price target of $50. There is nothing special about that level other than it is a round number. The $49-$42 area shows (left side of the chart) a decent amount of volume, so I would consider a support area until proven otherwise.

Bottom line: GIS is still in a downtrend and the pace of the decline has not slowed. I still do not find any compelling technical reasons to approach GIS from the long side.

Employees of TheStreet are restricted from trading individual securities.