Rangebound Kraft Foods Returns to Sale Status
Pulling back for a third day in a row are shares of Kraft Foods Inc. (KFT). The sell-off in Kraft drags the stock back into oversold territory for the first time since the beginning of the month. Perhaps ironically, KFT’s last stint in oversold territory also came as a result of a three-day pullback – one that was met by strong, short term buying.
How strong? After closing lower for three days in a row at the end of October and into November, shares of Kraft Foods rallied by more than 2% over the next two days en route to new, 52-week highs. Previous short term, multi-day sell-offs in early October and early September were also excellent opportunities for traders to make quick work of short term oversold extremes. Three down days in October that took KFT into bear market territory briefly were followed by a rally during which shares of KFT closed higher for eight days in a row, gaining more than 7%. A four-day drop in mid-September was met by a three-day buying spree that sent KFT up by over 4%.
One of the reasons why Kraft has been worth watching in recent months is the fact that the stock has been rangebound. Finishing at $34.77 on Friday, Kraft is essentially trading at the same level it was trading at back in mid-May. Since then, KFT has traded as high as $36 and as low as $32. And in those swings back and forth over the past few months have been a number of instances when shares of KFT retreated to levels where buyers, historically speaking, have been lured off the sidelines and into the market.
Traders looking for other stocks from the consumer staples sector that have begun to pullback include H.J. Heinz (HNZ), which plunged by more than 3% to finish both oversold and just inside bear market territory. Also beginning to see some profit-taking are shares of CVS Caremark Corp. (CVS). CVS pulled back by less than 1% on Friday, but is already at technically oversold levels.
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David Penn is Editor in Chief of TradingMarkets.com