Something Is Off With Campbell Soup Today
The market has had a surprising reaction to strong earnings from the processed food company and a dive into the data offers some guidance.
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Shares of Campbell Soup Company CPB are falling Wednesday after setting stronger-than-anticipated guidance. The company beat top-line and bottom-line estimates when it reported the latest earnings numbers on Wednesday morning.
Am I missing something? Are we not eating enough snacks?
Let's check out the charts and indicators.
In this daily bar chart of CPB below, I can see that prices are testing the 200-day moving average line and trade below the declining 50-day moving average line. The On-Balance-Volume (OBV) line has been weakening since early May and tells me that traders have been more aggressive sellers of shares ahead of the earnings report. The Moving Average Convergence Divergence (MACD) oscillator is crossing below the zero line for an outright sell signal.
In this weekly Japanese candlestick chart of CPB below, I see a mixed picture. Prices have improved from a low in October but the rebound has been only "OK." Prices are trading above the 40-week moving average line but that lagging indicator could be tested this week. The weekly OBV line is showing weakness in May. The MACD oscillator is above the zero line but narrowing toward a potential bearish crossover.
In this daily Point and Figure chart of CPB below, I can see a potential upside price target in the $58 area.
In this weekly Point and Figure chart of CPB, below, I can see an upside price target of $58 — the same as the daily chart above.
Bottom line strategy: Reading into some of the analyst's comments on CPB earnings today, I noticed that the consumer giant reported a 2% sales decline in snacks. Is that what is causing the weakness in the shares?
I associate soup with the winter months in the northern hemisphere but markets are discounting mechanisms. A decline to $39 on CPB will turn the charts bearish.
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