An Eggcellent Trade

In my October 16th, 2015 Seasonal Forecaster newsletter, I focused on a trade setup in Cal-Maine (CALM) stock. I stated “Cal-Maine, one of the largest egg producers, is a company with good fundamentals, a good seasonal track record for this time of year, and appears to be under accumulation. Even though their past three earnings reports have fallen short of expectations, the stock remains near all-time highs and appears ready to break upwards.”

CALM's seasonal pattern showed a track record of strong gains over the next 10 weeks – an average of 26% a year (yes, there was one year, 2003, that produced a huge gain, and that affects the average, but even removing it, it is still good). But the ‘win rate', the percentage of years that produced gains, was kind of low at 67%. When using seasonal analysis for trade selection filtering, I usually look for win rates of 75% or greater.

However, I noticed that the track record in recent years was better – most of Cal-Maine's losses over the next 10 weeks were in the early years. The company has made itself more attractive to investors in recent years. Focusing on the past 12 years, CALM has had only 2 losses, for an 83% win rate. And those two loses were minor compared to many of the gains.

I continued, “This is not a sexy stock. When you are taking your kids around on Halloween, and Bill, that annoying guy down the street, answers the door and while the kids are getting their treats, mentions he [was] loading up on that new social media stock that IPO'd and asks what you're trading, you'll look sheepishly at the ground and say ‘eggs'. But like Hormel, when the rest of the market is weak, it is the unglamorous stocks, the ‘basic products that everyone uses' stocks, that tend to do the best.”

“CALM is attractive at current prices. The highest probability trade would be if CALM broke above resistance from previous highs at 60.”

“I would consider a covered call, to lower the cost basis on the stock and give some income in case it takes a while to break upwards. With CALM at 56.78, and CALM November 60 calls trading around 1.02, if CALM reached 60 by November 20 (November option expiration day), this trade could return 7.6%, which would be 78% annualized. Add in the upcoming dividend, and you could have a nice trade.”

So I added CALM stock to the Season Forecaster portfolio at Friday's open price of 56.93.

Apparently I wasn't the only one who thought it was time for CALM to break out. By Monday's close, CALM had gained 11%:

The stock broke above resistance to new all-time highs, on high volume. Coupled with the fact that Cal-Maine was due to pay a $0.983 per share dividend to holders of CALM stock on October 28th, this 'embarrassing' trade turned into a great trade. When trick-or-treating, anyone who is in CALM stock can now proudly say “Eggs!”.

Once again, seasonal analysis, the study of strong past participation of institutions in certain stocks, brought a great trade candidate to the surface.

Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day.  To find out more, please click on the following link: www.markettamer.com/seasonal

By Gregg Harris, MarketTamer Chief Technical Strategist

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Gregg Harris is the Chief Technical Strategist at MarketTamer.com.

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MarketTamer is not an investment advisor and is not registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory Authority. Further, owners, employees, agents or representatives of MarketTamer are not acting as investment advisors and might not be registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory.


This company makes no representations or warranties concerning the products, practices or procedures of any company or entity mentioned or recommended in this email, and makes no representations or warranties concerning said company or entity’s compliance with applicable laws and regulations, including, but not limited to, regulations promulgated by the SEC or the CFTC. The sender of this email may receive a portion of the proceeds from the sale of any products or services offered by a company or entity mentioned or recommended in this email. The recipient of this email assumes responsibility for conducting its own due diligence on the aforementioned company or entity and assumes full responsibility, and releases the sender from liability, for any purchase or order made from any company or entity mentioned or recommended in this email.


The content on any of MarketTamer websites, products or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options and other securities involves risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities is not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options. The www.MarketTamer.com educational training program and software services are provided to improve financial understanding.


The information presented in this site is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing in our research constitutes legal, accounting or tax advice or individually tailored investment advice. Our research is prepared for general circulation and has been prepared without regard to the individual financial circumstances and objectives of persons who receive or obtain access to it. Our research is based on sources that we believe to be reliable. However, we do not make any representation or warranty, expressed or implied, as to the accuracy of our research, the completeness, or correctness or make any guarantee or other promise as to any results that may be obtained from using our research. To the maximum extent permitted by law, neither we, any of our affiliates, nor any other person, shall have any liability whatsoever to any person for any loss or expense, whether direct, indirect, consequential, incidental or otherwise, arising from or relating in any way to any use of or reliance on our research or the information contained therein. Some discussions contain forward looking statements which are based on current expectations and differences can be expected. All of our research, including the estimates, opinions and information contained therein, reflects our judgment as of the publication or other dissemination date of the research and is subject to change without notice. Further, we expressly disclaim any responsibility to update such research. Investing involves substantial risk. Past performance is not a guarantee of future results, and a loss of original capital may occur. No one receiving or accessing our research should make any investment decision without first consulting his or her own personal financial advisor and conducting his or her own research and due diligence, including carefully reviewing any applicable prospectuses, press releases, reports and other public filings of the issuer of any securities being considered. None of the information presented should be construed as an offer to sell or buy any particular security. As always, use your best judgment when investing.