Another Market Leader, Green Mountain Coffee Roasters, Stumbles
Green Mountain Coffee Roasters (NASDAQ: GMCR) gained more than 65% in the first weeks of 2014, adding to gains of more than 80% in 2013. GMCR is up more than 2,300% since bottoming in 2008. This market leader has now pulled back and is set up as a potential buy with a PowerRatings of 9. GMCR has given only one other PowerRatings buy signal over the past three months. As the chart below shows, that provided a timely entry.
PowerRatings are based on the relative strength or weakness of particular stocks or ETFs. The higher the rating, the greater the one week historical gain has been for stocks and ETFs with that rating. For best results, enter trades on stocks with a PowerRatings of 8 or higher with a limit order 3-7% below the previous day’s closing price. Higher % limit entries have historically shown a greater percentage of winning trades but higher % limit orders also reduce the chance of trade execution.
In the past, buying stocks with a rating of 9 on a 3% pullback the next day and selling five days later has been profitable 75% of the time. The average winner has gained 4.3%. Other entries and exits also show high winning percentages and large average gains.
GMCR’s pullback came after competitor SodaStream (NASDAQ: SODA) reported better than expected earnings. The pullback in GMCR could be an overreaction to the news. SODA reported earnings of $0.03 a share, $0.02 above the consensus estimate. Analysts had lowered their estimates from $0.64 a month ago and SODA reported earnings per share of $0.36 a year ago. There is little in the earnings beat to indicate that SODA has improved its competitive position relative to GMCR. The pullback in GMCR could be a buying opportunity for a company and stock with high momentum.
All data is as of the end of day on 2/26/2014.