Conclusion, Investment Implications, Strategy

Consumer Staples stock Cal-Maine Foods (CALM) is currently testing major underlying support near $42.52 amid monthly oversold conditions, setting up a potential low risk buying opportunity.  A sustained rise above the $44.76 area would target an 18% rise to $55.65.  This is an Asbury Value idea.

Analysis and Rationale

Cal-Maine Foods, Inc. (CALM), together with its subsidiaries, produces, grades, packages, markets, and distributes shell eggs. The company offers specialty shell eggs, such as nutritionally enhanced, cage free, organic, and brown eggs under the Egg-Land’s Best, Land O’ Lakes, Farmhouse, and 4-Grain brand names, as well as under private labels. It sells its products to various customers, including national and regional grocery store chains, club stores, foodservice distributors, and egg product consumers primarily in the southwestern, southeastern, mid-western, and mid-Atlantic regions of the United States. Cal-Maine Foods, Inc. was founded in 1957 and is headquartered in Ridgeland, Mississippi.

The upper panel of Chart 1 below plots CALM daily over the past year along with its 200-day moving average, a widely-watched major trend proxy currently at $45.42 which the stock has recently tested as major underlying support and is currently rising from.  The lower panel plots monthly overbought/oversold conditions according to the 21-day (monthly) Stochastic oscillator.  The green highlights show that CALM is currently rising out of monthly oversold extremes, and that previous instances of this coincided with Tactical bottoms on Dec 3rd, Oct 13th, and Aug 5th, 2021. 

These conditions suggest another similar low-risk buying opportunity now.

Chart 1

Risk/Reward

Table 1 below shows that considering a $55.65 upside target with a protective stop placed below the $44.76 area, a long entry price of $47.00 would provide a 1:3.9 risk/reward ratio (risking $1.00 to make $3.90) with an initial risk of 4.8%.

Table 1

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Please consult the table showing our Asbury 6 key market metrics to help determine if this investment is suitable for you.