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JimVanMeerten (56.80)

Has Green Mountain Coffee Roasters peaked?



September 29, 2011 – Comments (0) | RELATED TICKERS: GMCR.DL


A little stock that could is Green Mountain Coffee Roasters (GMCR).  This stock has been on a run all year and is even going to be the subject of  CNBC special in the next few days.  In the past year the stock is up over 251% as this Barchart graph shows:

Barchart technical indicators:

1 - These are short term indicators that may signal the correction in price that many newletters including Value Line have been predicting

2 - 60% Barchart short term technical sell signal

3 - Trend Spotter hold signal that is showing a bullish tendency

4 - Trading below its 20 and 50 day moving average but still above its 100 day moving average

5 - Although the stock has gone up over 251% in the past year the stock has recently fallen 16.17% off its recent high

6 - The Relative Strength Index is down to 39.23% and still falling

7 - Barchart computes a technical support level at 90.46

8- Recently traded at 96.60 which is below its 50 day moving average of 101.24

Summary: Green Mountain Coffee Roasters (GMCR) has had a fantastic run up but with a P/E ratio of 76.67% it would need to have maintain an earnings growth rate of 4 times the market to sustain the ratio.  Most experts predict that the markets have an upside potential of around 85% over the next 5 years.  Using GMCRs earnings forecasts and return to a more normal P/E ratio makes me feel that over the next 5 years the total return from this point on will not be appreciable higher than the rest of the market.  If you presently hold this stock please use caution and place appropriate sell stops to preserve your profits.  Stocks with P/E ratios this high fall fast at the first hint of not meeting earnings expectations.  Short interest in this stock is starting to grow and day traders should watch this in order to take advantage of some short term instability.  Long term investors won't make much if you  enter  at this price level.

Jim Van Meerten is a Marketocracy Master

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