The End of Fruity Pebbles?

The End of Fruity Pebbles?

June 21, 2017 Off By Chuck

Ok, I have to be upfront.  This post is not about the end of Fruity Pebbles cereal but I had to come up with something to grab your attention with a title that read “Lower Prices for Post Holdings Stock” (the maker of Fruity Pebbles, Shredded Wheat, Raisin Bran, Honey Bunches of Oats, etc.)

As you can see in the chart of Post Holdings, POST, below its stock has risen some 190% (peak to trough) since its last major bottom in Oct. 2014. After first topping in July of last year it made another attempt to break that $88 level and failed creating a double top in April of this year. Since then, price has broken below a (now) falling 200 day moving average and just last week has pierced the (blue) multi-year uptrend support line.  All of these point to the likelihood for ongoing weakness into the summer months. $71 is an important area of support where POST is likely to find at least a temporary bottom and the chance for a reversal if I am correct about weaker prices ahead. As always, if we were to get a correction in the overall market, POST be in for a much bigger decline and the $55-$57 zone (T2) would be its next likely home as that is the double top pattern downside target.

One last point of disclosure … I have a (negative) thing for POST. It’s nothing against the company or products (well, I never did like their Smurfberry Crunch) but rather its stock. You see back in 2014 I did an almost perfect call in identifying the bottom of the 2014 decline and went long the stock.  What’s not to like about that you ask? I eventually got shaken out of the position on its first major pullback and ended up with a measly 30% return for my efforts, missing out on most of its 190% gains. My mentors have taught me to never invest with emotions so hopefully I have demonstrated overwhelming evidence that my current short entry is based upon technical reasoning and not a desire to get even.