Hersheys HSY is a Stealthy Strong Stock Getting Stronger

Dec 6, 2013: 1:04 PM CST

I continue to emphasize the theme of “Strong Stocks Getting Stronger,” particularly for position and swing trading candidates, and Hershey’s (HSY) adds another layer to the saga.

Hershey is a stealthy strong stock that doesn’t generate as many headlines as other high-flying stock names, even though we’ve all (I’d assume) heard of The Hershey Company or enjoyed their delicious products.

Yet behind the scenes, the stock price has quietly doubled from $50.00 in early 2011 to its recent spike above $100.00 per share:

Hershey's HSY Daily Chart Trend

Pro-trending or strongly trending stocks tend to get stronger over time, and it’s often best to use pro-trend retracement or even outright price breakout strategies for swing trades into uptrending stocks.

Compare volume during the trend – note when volume rises with the rising price trend as was the case during 2011 and early 2012.  This also tips the odds to favor future higher prices yet to come over time.

Unfortunately, very strongly trending periods don’t allow clean entries – or at least low-risk retracement/pullback trades – which we can see during the straight-up impulse swing at the start of 2013.

The current interaction at the $100.00 per share level will be the focal point, and buyers/bulls could logically take well-deserved profits into this “round number reference level.”

Short sellers wouldn’t have clean opportunities to fight the rising trend unless price breaks under the $90.00 per share level which would trigger a breakdown event under the rising 200 day SMA and 50 week EMA confluence.

Speaking of the weekly chart, let’s see how Hershey shares reversed their downtrend and valiantly trending toward the current $100 milestone.

Hersheys HSY Strong Stock Weekly Chart Accumulation Realization Wyckoff Stock phases

The 2009 period – actually 2007 to 2010 – highlights one of my favorite patterns for a stock:  The “Rounded Reversal” or scallop/arc trendline structure.

Note the weekly breakout in early 2010 that continued with the early 2011 breakout above $50.00 per share.  Note also the bullish breakout above the $60.00 per share level in early 2012.  And finally, note the strong breakout in early 2013.

From this, we can develop a theme that Hershey shares have had a tendency to trade strongly at the start of a new year.  One would assume Valentine’s Day and the amount of chocolate purchased during this time may be one of the main drivers of this seasonal pattern (hint – watch 2014 for a possible repeat).

Nevertheless, Hershey’s (HSY) reminds us that common, known, and some may even say “boring” stock names can be sneaky winners to a portfolio or even swing trading watchlist.

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Follow along with members of the Daily Commentary and Idealized Trades summaries for real-time updates and additional trade planning parameters as we watch a “hold and bounce” or “break and retrace” scenario play out in the near future.

Corey Rosenbloom, CMT
Afraid to Trade.com

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Corey’s new book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

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