PPC - Pilgim's Pride hurt - oversold | long contrarian view

Pilgrim's Pride fall from grace came following a proposed securities class action alleging the poultry giant concealed a price-fixing scheme with other broiler chicken companies, that resulted in a stock price plunge when revealed. The case is Hogan v. Pilgrim’s Pride Corporation et al, case number 1:16-cv-02611, US District Court of Colorado. The fall is complete reversal following its double-top high at $38, in December 2017. The 2017 rally was founded on excellent fundamentals: a stock that trades at 7 times earnings, half of sales, consistently profitable, cash generative, well priced to sector and leading industry player.

The stock has nosedived. Today, at $20, is a level I think investor will be tempted to reenter at. A big, round number, it marks both the summer 2007 low, and close to the upward trend since 2014. There is a good chance that it can move lower to the major support at $18, but with a target of $25 I think a buy now at $20 is worth the return to risk.

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This consolidation into $20 with no reversal from heavy buying, is a clear bearish signal. Do not enter long, close out and reverse to a short position. Target $16.