Conclusion, Investment Implications, Strategy
Consumer Staples stock The Hershey Company (HSY) is currently testing major underlying support near $197.30 amid monthly oversold conditions, setting up a potential low risk buying opportunity. A sustained rise above the $201.42 area would target an 11% rise to $231.60. This is an Asbury Value idea.
Analysis and Rationale
The Hershey Company (HSY) together with its subsidiaries, engages in the manufacture and sale of confectionery products and pantry items in the United States and internationally. The company operates through three segments: North America Confectionery, North America Salty Snacks, and International. It offers chocolate and non-chocolate confectionery products; gum and mint refreshment products, including mints, chewing gums, and bubble gums; pantry items, such as baking ingredients, toppings, beverages, and sundae syrups; and snack items comprising spreads, meat snacks, bars and snack bites, mixes, popcorn, and protein bars. It markets and sells its products to wholesale distributors, chain grocery stores, mass merchandisers, chain drug stores, vending companies, wholesale clubs, convenience stores, dollar stores, concessionaires, and department stores. The company was founded in 1894 and is headquartered in Hershey, Pennsylvania.
The upper panel of Chart 1 below plots HSY daily over the past year along with its 200-day moving average, a widely-watched major trend proxy currently at $197.30 which the stock is currently testing as major underlying support. The lower panel plots monthly overbought/oversold conditions according to the 21-day (monthly) Stochastic oscillator. The green highlights show that HSY is currently starting to rise out of monthly oversold extremes, and that previous instances of this coincided with Tactical bottoms on May 19th and on Nov 8th and Sep 22nd 2021.
These conditions suggest another similar low-risk buying opportunity now.
Risk/Reward
Table 1 below shows that considering a $231.60 upside target with a protective stop placed below the $201.42 area, a long entry price of $209.00 would provide a 1:3.0 risk/reward ratio (risking $1.00 to make $3.00) with an initial risk of 3.6%.
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