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A Critical Juncture For Hormel

SwingTradeLife profile picture


  • Hormel has been consolidating since its peak in early 2016
  • The stock now trades at a critical support area
  • Buying HRL now is relatively low risk as a further drop would signal it's time to sell

Hormel (NYSE:HRL) has treated investors well over the years that stood pat and held the stock through it's epic run from 2009 through early 2016 when it peaked at $45.72 per share. But since that time the stock has been relatively uneventful, consolidating previous gains.

It's easy to see this progression when looking at a weekly chart:

But I believe now is a great time to buy Hormel for the simple reason that the $33 per share mark is strong support. With the stock trading just above this level it gives us a clear line in the sand to define our risk. Let's take a look at the daily chart to get a feel for the significance of the $33 level:

Notice how Hormel has touched or come close to touching the $33 level several times since mid-2016. The stock has been consolidating in a range that continues to tighten, but support is clearly at the $33 level.

The odds of another bounce off support are pretty good. And these are exactly the kind of setups I look for when taking a trade or getting long a stock.

What happens if we fall below $33?

Just because a certain price level has proven to be support in the past does not mean it will continue to hold as support going forward. So we need to be prepared for the chance that Hormel falls further. What's our next support level?

The best thing to do is to zoom out to the weekly chart again:

The red line you see there is the 200-week simple moving average. It currently comes in at a price of $30.82. If the stock were to fall further, I'd expect that area to offer at least some support. If you really love Hormel, it wouldn't be a bad place to add more stock

This article was written by

SwingTradeLife profile picture
I've been investing and trading for over fifteen years. After trading for a hedge fund in Chicago for two years I decided to go out on my own. I now trade for a living.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I am short Hormel puts.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (35)

"Buying HRL now is relatively low risk as a further drop would signal it's time to sell "

Why would you sell? If the price goes down, this one is an even bigger buy - little long term debt, good management, solid growth of the top and bottom line....lower price = buy!!!

Good investing!
So I am guessing here but do you still have buy signal on Enron? It is cheap and getting cheaper.
whatever, you all say, i am in for the long haul, i will hold on and whatever happens, happens, remember you sell i will buy, buy, buy.
SwingTradeLife profile picture
Don't completely follow this Max. But glad to see another HRL long :-)
6608281 profile picture
I like the price at these levels. Been nibbling at the stock in the $33-34 range. Silmilar to the author have sold the Sep 30 puts. Get paid to wait for the dip.
SwingTradeLife profile picture
Awesome! Love to see other options sellers around here. I plan to write more about this strategy. If we don't trade above $35 by the 21st I'll just roll my puts out to August.

Rinse and repeat :-)
Author, when looking at Hormel price trend longer term Hormel should be 11.00 stock yielding 6%. The bubble in Hormel price since 2009 is not justified when looking at Hormel longer term.
Ian Bezek profile picture
I'll be happy to sell you HRL $11 puts. Name what expiry you want, and we can do business.
Ian, not exactly what I said, but I would buy 7/2020 puts at 13.19. What your price?
You see, they make Spam, which people will buy when stocking up for whtn SHTF...
ComputerBlue profile picture
Looking forward to seeing what they do with their balance sheet flexibility..who are they targeting to acquire?
CB, Hormel is a high risk stock at this price and should be trading a lot lower with a much higher yield.

The market is starting to discount risk that Hormel may not be able to pull off their new grow through acquisition business model.
They just acquired Applegate farms not two years ago. they will be working on improving/expanding Applegate - organic/humanely raised/etc. - products for a while.
kwatson304 profile picture
hope to buy today at 32.
kwatson304 profile picture
own in my TFSA and want to add on the dips.
SwingTradeLife profile picture
Could definitely get there. Stay patient but don't get greedy :-)
SwingTradeLife profile picture
Great stock for the long haul, and as I outlined this seems like a great place to be adding more. GL!
PACKER man profile picture
Goes ex div 7/13 so today and tomorrow are the last dates to get the dividend and wait for "the turkey to come back"!
SwingTradeLife profile picture
Haha, I like your attitude. Great point about the ex-divi date.
Bruce Ward profile picture
Low payout ratio, 5 year DGR over 136%, a debt free company, has raised dividends for 50 years, and a fair P/E? I've be waiting for a while for HRL to dip into the "under $33" range for a while to start a position with them and I finally got my wish. I'm not worried at all about HRL. I'm sure they'll do just fine.
DK.DivInvestor profile picture
Exactly, this company was put on my radar thanks to its strong fundamentals. It is probably the best run company in this space relative to similar sized peers.

Been lookin for an entry for the past year and 33 was my big point for two indicators. My PE indicator says to buy closer to 28 though. Decisions decisions
SwingTradeLife profile picture
We have different approaches, Bruce, but our thought process is the same. I don't want to own HRL, not because I don't like the company... I just manage my investments differently. That said, I'd be happy to own the stock if it got put to my through my options. The reasons why are those you listed. I always make sure I'm selling options on stocks I'd be happy to own.
"Raised dividends for 50 years" and still yield only 2%, fools gold.
It hit 32.65 yesterday
SwingTradeLife profile picture
Yes, it did.
It hit 32.48 today but the yield went up, fools gold.
mr_cassandra profile picture
Just because a certain price level has proven to be support in the past does not mean it will continue to hold as support going forward. So we need to be prepared for the chance that Hormel falls further. What's our next support level?

My compliments on covering this important perspective
SwingTradeLife profile picture
Thanks Mr. Cassandra. Too many people rely on technical analysis levels without planning for what will happen if they don't hold as support/resistance. I strongly believe in having a plan well ahead of time. Without one you're reacting in the moment and likely when emotions are running high. That's not a good recipe for success!
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