Episode 51 - Hersheys Chocolate and Stock Market Sentiment
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This is episode 51 of The LongVol Report Podcast – welcome back and for the new listeners, welcome. Make sure to subscribe to the Spotify/YouTube – we put this out each Thursday with the Pod/video out on Fridays, you can ask questions each week here and I’ll do my best to answer.
This week we had a funky CPI print (which was rounded down) which the market seemed to like with green candles everywhere and that just a week ahead from the Trump 2.0 Presidency. Is this going to stick or are we in for a head fake is the question I am certain most are going to end this week with.
I have my views and will share them this week in the podcast version.
We expected some short rallies coming into this week for those who read The LongVol Report but that gap up and push is as extreme as it gets. My views, while tested this week, are still the same on the broad markets being frothy, earnings growth slowing on Mag 7 names and the BOJ coming hike having an adverse affect on select US equities….
But, I’m not a bear so don’t get turned away esp. considering we’re just about to start earnings season which means important material changes are coming to some of the names we’ve talked about on this show and in The LongVol Report.
Some notes from the report on Sunday.
This week I am going to spend some time on Hershey’s stock and talk about some things that are of interest to me. I am not certain this is a long-term investment and could just be a trade but none-the-less I want to share some views since we just introduced it into the report last Sunday.
This week we’ll talk about:
- Broad Market Update
- CPI Thoughts
- SPX500 Notes & Charts
- Meta Trade from The Momentum Monitor
- TSMC Had Earnings; I am Not Bullish The Price Action
- The Economy Looks Strong: Barrons Article
- BOJ Rate Hikes are Likely This Month
- May I Interest You in Some Chocolates? A Look at Hersheys
Now on Spotify
The Broad Market: Stock Market Sentiment
The CPI print this week was the key and I’d be lying to you if I said I thought it would come in where it did. This is another reason why I try to stay away from trading broad market too much because you end up trading binary events/outcomes which what we had on Wednesday. It’s the equivalent to traders betting on an earnings report the day before v. investing into it and waiting quarter by quarter like we’re doing on VF Corporation and ACV Auctions.
But, that’s the game you play and sometimes you get a boost and sometimes you’re the statue where the birds sit on if you get my drift.
Some others shared similar views….
SPX500 notes from The Report Sunday and then some charts like we do each week here on the show….
- $5900 was key and we broke it but still are below $6050 which matters for overall momentum.
- Some charts: GLD, XLE, XLF, TSM, AVGO
Meta Trade From The Report: this week has been just as erratic as the broad market and other shiny-object stocks but for the day traders in the report there was a perfect trade this week and a teachable lesson for the free listeners/readers here.
The opening drive is the first 5-60 or even call it 90 minutes when order flow (volume) is usually high. The idea is to use that order flow along with either/or the following:
- Key technical price levels (as noted in the report)
- Some news catalyst
- I want to trade that opening drive in that direction whether its 15 minutes or 60, it doesn’t matter
The blue lines you see on that chart are prior high of day and prior low of day. For listeners of the show I will go into more detail on the podcast….
Taiwan Semiconductor Report Notes: had another great earnings but price action, for whatever reason, doesn’t seem to like it as much today. This has been a stock we flagged on this show last May sub $140.
- Review earnings and the chart
- Our notes from Issue 2 of The LongVol Report
Crude oil has had a great start to the year and is reminiscent of Q1 last year almost exactly. Many oil names have quietly moved higher such as:
- $EOG. $VLO, $SLB and others…..
- When these things get going they move and I had some notes in the report for readers about this idea on Sunday.
Japan Rate Hikes....
I talked about this in issue one of the report and on the show the last few weeks. This week we had more comments from the BOJ regarding rate hikes and traders now have this priced in as a 89% chance for the January meeting. To be clear, I am not sure how much more they could have telegraphed this and it becomes a question of two things:
1) Whether you believe they’re going to do it
2) What affect that has on select US equities, if any.
I have my views and have discussed them in the past 2 issues of the report.
Technically Yen futures turned bullish this week after the Wednesday meeting with the comments made. This makes it interesting given the rally in shiny-object stocks this week which are likely to be the ones to become affected the most should this hike happen.
Hersheys Chocolate
I’ve had this on the radar for about 3 months or ever since we had a call with som readers and it’s something that was introduced into the report last week and a new position for me – opinion, not advice.
Let’s start with some of the quick back story here:
- Mondelez made an attempt at a second buyout which hit the papers December 9th, the stock rallied nearly +20% intraday. They also made an attempt in 2016 which was rejected.
- The main driver for share destruction is the rising cost in Cocoa beans as noted by the Company in recent earnings reports. – Cocoa prices are up nearly 4x since 2022
- They own over 90 brands (not just chocolate based either), Reese’s is their biggest product.
- Their Salty Snack segment was also down – so that needs attention as well aside from just the Cocoa related ingredient products and we’ll track in the next earnings…
- Price action: we’re trading at the same highs in 2020 with some bearish monthly order flow candles so this makes it appealing (to me) as of now for a trade…maybe it becomes more as more things change….
Trading at valuations not seen in a while…technically at some key areas we’re interested in as well so as we get into next earnings in just a few weeks (Feb) we’ll get a better picture on things.
- Cocoa futures up nearly 4X since 2022 – maybe a double top in play?
- Allegedly (a few weeks ago) they asked to break exchange limits so that they could hedge out exposure – the Reuters article is here
- The ex-futures trader in me sees that chart and things “pay attention, this is a larger time frame signal that could get bearish” – in fact, I might have to fire up StoneX and look at a trade here…
- For the savvy readers here, look into other names correlated to Cocoa prices and see if there are ideas to be had (if you are in DeltaOne, please share what you find)
Having Cocoa prices come down should have a short-term affect in share prices/overall stock sentiment and that alone is enough to watch, esp. for the traders that watch/read this report.
For the investors (and I am not sure this becomes more than a trade for me as of now) there are other problems in the Salty Snacks segment as well. We’ll get a better picture of this and more in earnings in a few weeks.
Conclusion: A trade only at this point (opinion not advice) but this has my attention given the price levels and valuation we’re trading at now (really the price levels). We have earnings in a few weeks and I hope they do a better job of discussing the Company and shine some light on Cocoa prices/hedging or lack of.
A daily candle close (weekly would be better!) above +$161 would be positive on my models for price action. Until the next podcast, thanks for watching and remember issue 3 is out Sunday!
Final Word.
- Issue 3 is Out Sunday – You can get a Free 2 week trial.
- I’ll be In Dubai in February for meetings if you’re a reader/follower and want to meet up let me know.
- Pay attention to Japan and Shiny object stocks next week and how we close the markets this week. Very important!
This is opinion, not advice. Please read the terms and disclosures.
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