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Do You Enjoy A Coffee?

03/08/13 09:42:45 AM
by Koos van der Merwe

Enjoying an early morning coffee is always a pleasure.

Security:   GMCR
Position:   Accumulate

"Coffee is more than something to drink. It connects us to each other and to the rest of the world." This is Green Mountain Coffee Roasters' motto.

Where Starbucks (SBUX) has shops selling coffee all over the world, or almost all over the world, Green Mountain Coffee Roasters (GMCR) sells coffee over the Internet. On March 10, 2011 GMCR and SBUX announced a deal whereby SBUX would sell its coffee for brewing with GMCR's Keurig machines. Looking at the charts, we see the following.

Figure 1. Weekly chart of Green Mountain Coffee.
Graphic provided by: AdvancedGET.
In the weekly chart in Figure 1 the share price is tracing a wave 3 of what could be a WAVE 1 in a new bull trend. The RSI is at oversold levels, suggesting a correction in a wave 4 of WAVE 1 is possible in the near future.

Figure 2. Daily chart of Green Mountain Coffee.
Graphic provided by: AdvancedGET.
The daily chart in Figure 2 looks interesting. On February 21, 2012 the share price reached a B-Wave high on a gap and then fell on a gap. This created an island formation, suggesting a major correction, which did occur. The share price then bottomed on July 20, 2012 at 17.26 on a major WAVE C. The share price then started rising in a new bull trend and appears to be in a wave 5 of what could be a WAVE 1. The RSI indicator is suggesting overbought levels, with weakness in the future. The correction that will occur once wave 5 is completed could see the price fall to somewhere between $42.14 and $49.41, the 4th wave of lesser degree. Note the buy signal given by a rise above the upper JM Internal band on October 16, 2012. The JM internal Band is a 15-period simple moving average offset by 2% positive and 2% negative.

I would not be a buyer of Green Mountain Coffee at the moment as an investor. I would wait for the correction. However, as a trader I would buy on any minor correction.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

Address: 3256 West 24th Ave
Vancouver, BC
Phone # for sales: 6042634214
E-mail address:

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