Profit from America’s Sweet Tooth with Hershey
01/17/2011 10:57 am EST
Today’s trading idea can be described as simply getting in front of a trend. That trend isn’t so much a price trend, but the US consumption of candy over the next few months during Valentine’s Day and Easter.
This is a longer-term trade that is based on the fact that increased sales of a company’s products will almost always lead to an increase in their share price.
One company that will benefit from the increase in confection consumption in the next few months is Hershey Foods Corp. (HSY).
This is a swing trade that could last between 30 and 90 days.
My longer-term trades are almost always based on a big idea or trend unrelated to the price of the stock. I then go to the charts to see where to enter and place a stop and profit target.
In this case, the chart shows an area of support around $46 and resistance just below $50. The stock has had difficulty three times recently breaking through that price level.
Increased candy sales in the next few months as stores begin putting out Valentines Day and Easter displays, I believe, will be enough to push it above that level and beyond to a new 52-week high.
Aggressive traders wanting to enter early could do so around $49.50 with a stop just below $46. More conservative traders would want to see a daily close above that $50 price area before entering and placing a stop loss in the area of $49.50.
By Tim Bourquin, trading content director, MoneyShow.com