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OAT - Quaker OatsWeek Ended: 3/17/01
Price 95.79 P/E Ratio 37.81 52 Week High 99.33
Last Week + 1.72 Earnings Date 5/3/01 52 Week Low 45.81
Picked At 99.33 Date Picked 3/8/01 Sector Consumer Non-Cyclical
Current 95.79 Open 96.60 Change -1.45
Low 95.70 High 96.65 Volume 844,600

Company Description

Quaker Oats Company is a major participant in the competitive packaged food industry in the United States and Canada and is a manufacturer of hot cereals, pancake syrups, grain-based snacks, cornmeal, hominy grits and value-added rice products. In addition, the Company is a manufacturer of pancake mixes and value-added pasta products and ready-to-eat cereals.

Play Description

March 8, 2001

Quaker Oats produces and markets food and beverages, which include well-known brands such as Quaker Oats, Gatorade, and Rice-A-Roni. In early December, PepsiCo (PEP) agreed to buy Quaker Oats. After several weeks of considering various buyout offers and engaging in extensive talks with both Coca-cola and PepsiCo, OAT finally agreed to be acquired by Pepsico. According to the terms of the agreement, PepsiCo will agree to pay $13.4 billion in stock, exchanging 2.3 PepsiCo shares for each share of OAT. The deal is set for an April closing but remains subject to shareholder approval, which is why we have not yet officially dropped OAT from our Candidates Index. To that end, the company currently has 131.93 shares outstanding and 400 million authorized, enough to split shares 2:1. In addition, the stock is trading well above its previous split of $32, which occurred back in 12/94. On Thursday, OAT trended to an all time new high of $99.33, on strong volume of 606,600 shares and uptrending OBV. A move above this price tomorrow when accompanied by midday volume of at least 300,000 shares could be a good entry point for momentum traders. We'll post our stop at $96 for now.

Picked on March 8th @ $99.33
Change since picked 0.00
Stop Loss @ $96.00


March 15, 2001

We entered OAT on the theory that the stock's upward trend would continue. On the day we picked the stock, shares had just broken into new territory and set a new all time high of $99.33. Unfortunately, a close above this stubborn level was never reached. That aside, the stock did offer us a couple of quick intra-day plays off the 50-dma, before our stop of $96 was finally taken out.

Picked on March 8th @ $99.33
Profit/Loss = -3.33 (-3%) (Stopped Thursday @ $96.00)
Best Profit = -0.21 (-0%)

March 13, 2001

On the day, shares of the Chicago-based OAT continued to consolidate near the $98 mark. During today’s trading, the stock gave a sharp intra-day bounce off the 50-dma ($96.44) and formed a bullish hammer candlestick formation. As many of our readers might already know, hammer formations can sometimes signal an impending reversal of a stock. Still, what has really captured our attention has been the lightness in volume over the past three trading days. The stock's three-month average volume is 704,000 shares per day. However, over the past three sessions, OAT has logged an average of just 520,000 shares. We feel this is a good indication of a lack of sellers in the stock. Bearing these indications in mind, we’ll look for an upside move to encounter resistance at the 5-dma of $98.41 and then at the $99.33 mark (all-time high). Support comes in at the 50-dma of $96.44. Look for entries to come when the stock breaks above resistance or bounces from support on strong volume of 350,000 shares traded by noon. We’ll continue to hold a firm stop at the $96.00 mark.

Picked on March 8th @ $99.33
Change since picked –1.55
Stop Loss @ $96.00

March 11, 2001

Quaker Oats is seeking to boost revenue growth by 9% for its current quarter. To accomplish this, the company has stepped up marketing efforts on its strongest product, Gatorade. Turning to Friday’s action, shares of OAT gave back some ground from Thursday’s sharp rally, closing at $98.80, down $0.53. What was encouraging was the weak of volume. The stock normally logs around 740,000 shares based on a three-month average, but Friday’s decline came on volume of just 281,700 shares. This is an indication of a lack of sellers in the stock, which could be the result of investors holding onto shares ahead of the upcoming PepsiCo buyout. Bearing this in mind, we feel there’s a good chance the stock will continue to show more momentum on the upside. So, to that end, look for initial resistance to come at the $99.33 mark (all time high). A potentially higher hurdle may follow at the century mark, which can often times mark the top of a rally. Support will come at the 20-dma of $97.83, with an additional base at the 3/2 intra-day low of $96.75, bolstered by the 30-dma of $97.11. Look to time your entries when OAT shares bounce off support or break above $99.33 on volume of at least 360,000 shares traded by noon. To limit our risk on the downside, we’ll keep firm stops at $96.

Picked on March 8th @ $99.33
Change since picked –0.53
Stop Loss @ $96.00


Copyright 2001

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