Altria Stock: Bearish Signal Should Provide Buying Opportunity

The market is bracing for major events over the next six months that could have a huge impact on the long-term direction of the market:

  • On Wednesday the Federal Reserve will conclude its two-day meeting with a rate decision at 2 p.m. EST. Most analysts have ratcheted down expectations and do not expect any change to the target rate from this meeting, but are looking more toward a hike at the July or September meeting.
  • Later this month, voters in the United Kingdom will decide on whether that country will remain in the European Union, which could have a huge impact on global equities markets.
  • The U.S. presidential election looms large in November; that will create uncertainty among investors.

With all of these events creating uncertainty, a solid consumer staple stock should be attractive to almost any investor and I think Altria (NYSE: MO) fills that role very nicely. Altria actually appeared on my bearish scan last night, but that isn’t really surprising since the stock is hitting the upper rail of an upward sloped trend channel. The channel on Altria is a little different from the ones I usually show you as I have put a mid-point line in the chart as well.
MO Daily Wyatt
I added the midpoint line because the stock has actually halted several short-term pullbacks near the midpoint line. We see that the daily oscillators have been in overbought territory recently, so a short-term consolidation wouldn’t be a bad thing for the stock, but then the upward trend should resume.
The weekly chart shows the steady climb Altria has made over the last two and a half years. I did place a line marking the temporary high from October near the $60 mark as that area could serve as a secondary support level should the stock move below the lower rail of the channel shown on the daily chart.
MO Weekly Wyatt
We see that the weekly stochastic readings are in overbought territory, but you can also see that the indicators have been known to remain in overbought territory for extended periods in the past. Should we get the short-term decline I think we will, this should help move the stock out of overbought territory.
Two other things that I like about Altria are the dividend the company pays and the sentiment from analysts. Altria pays $2.26 per year in dividends which is a yield of 3.4% at the current price and the yield would be over 3.7% if Altria stock dips to $61. Despite the steady climb and the adequate dividend, only nine analysts rate Altria stock at this time and five of them rate it as a “hold” and four rate it as a “buy.”
Given the uncertainty with interest rates, elections and referendums over the coming months, a boring but steady stock sounds good to me.
I would look to buy Altria stock when it dips down a little. You could buy the stock near the midpoint line of the chart or you could wait to see if it dips to the lower rail. Should the stock move down to the $59 area, I would look to get out of the trade.

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