MGPI is setting up in a potentially powerful breakout pattern. MGP Ingredients is a distilled spirits company. Alcohol stocks are often seen as defensive which would make sense why we are seeing money flow into these names right now. But the group as a whole saw a huge advance in 2020 during COVID lockdowns, so do not underestimate their power to perform. The sector as a whole is coming out of a Stage 1 consolidation base and is now trying to mount a breakout higher in Stage 2.
MGPI is my favorite stock in the alcohol group, both in terms of fundamentals and technical setup.
As you can see in the MarketSmith table I put on the bottom of the chart, sales and earnings have been skyrocketing at this company for the last four quarters. And gross margins are actually improving at the same time.
The technical pattern is what William O'Neil referred to as a "base-on-base" pattern. You will notice a first base that formed from December-March. Once the stock broke out, it consolidated once again to form a second base that is now completing with very tight price action in a 4% range over the last two weeks.
Base-on-base patterns are most common toward the end of a bear market when stocks break out but do not make their full advance because they are being held back by the general market. But once the bear ends (which it always does) these stocks can make powerful moves higher once their power is released.
I plan to buy on a breakout above 103.25. And thanks to the tight pivot area, I can place a tight stop at 99.05 to risk just 4% on the trade.
MGPI
MGPI is my favorite stock in the alcohol group, both in terms of fundamentals and technical setup.
As you can see in the MarketSmith table I put on the bottom of the chart, sales and earnings have been skyrocketing at this company for the last four quarters. And gross margins are actually improving at the same time.
The technical pattern is what William O'Neil referred to as a "base-on-base" pattern. You will notice a first base that formed from December-March. Once the stock broke out, it consolidated once again to form a second base that is now completing with very tight price action in a 4% range over the last two weeks.
Base-on-base patterns are most common toward the end of a bear market when stocks break out but do not make their full advance because they are being held back by the general market. But once the bear ends (which it always does) these stocks can make powerful moves higher once their power is released.
I plan to buy on a breakout above 103.25. And thanks to the tight pivot area, I can place a tight stop at 99.05 to risk just 4% on the trade.
MGPI