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Food Stock Nearing Bearish Breakout

Stocks gained this afternoon as the market imitated yesterday’s trading session. Bulls got off to a strong start, lifting share prices before they flattened out through noon. An afternoon rally ultimately brought stocks higher again as the Dow, S&P, and Nasdaq Composite closed with moderate gains.

Treasury yields slipped as the 10-year rate fell to 4.126%, down from yesterday’s high of 4.21%. Falling yields certainly helped stocks rally with the midterm elections underway.

Analysts pointed to the different potential outcomes of today’s voting and how they could impact the market.

“If we have a gridlock, that will probably be the best thing that could happen for the market. The markets usually do very well when that happens,” explained Wealth Alliance strategist Seth Cohan.

But Goldman Sachs’s Jan Hatzius warned investors that election day upside is limited opposite substantial downside risks.

“The financial market reaction to a Republican win should be muted, as the House outcome is already widely expected, and the Senate outcome makes less of a difference to policy outcomes if Republicans control the House,” Hatzius wrote this morning.

“A surprise Democratic win in the House and Senate would likely weigh on equities, as market participants might expect additional corporate tax increases.”

The S&P set a higher low today but barely closed above the 10-day moving average. With the index still trading well below the 200-day moving average, it’s imperative that the S&P sets a higher low to continue the market’s uptrend.

The stochastic indicator suggests there’s more room for the index to run. Uncertainty surrounding the elections today, however, could easily dissolve the market’s bullish momentum. It also should be noted that a retracement from here would result in a lower high, a bearish formation, for the S&P.

Don’t be surprised to see stocks chop sideways over the next few weeks unless the S&P can surge above resistance at 3,900.

For Conagra Brands (NYSE: CAG), however, things seem a little clearer. The stock closed below its bullish trend (yellow trendline) last week, and today, it closed below the 10-day moving average.

CAG is also approaching the 20-day moving average, and the stochastic indicator is not yet in oversold territory. A move below the 20-SMA would represent a major momentum shift for the stock.

For those reasons, it might make sense to take a bearish position on CAG with a trade trigger of $35.17, below today’s low, as the general market awaits the results of election day.

Michael James
Michael James has been an avid cryptocurrency trader since the very first Bitcoin was minted. With a background in technical analysis and long-term cycles, he's helped thousands of investors navigate the digital currency markets.


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