Cal-Maine Foods (CALM)

Company

"Cal-Maine Foods, Inc. is primarily engaged in the production, grading, packing and sale of fresh shell eggs. The Company, which is headquartered in Jackson, Mississippi, currently is the largest producer and distributor of fresh shell eggs in the United States and sells the majority of its shell eggs in approximately 28 states across the southwestern, southeastern, mid-western and mid-Atlantic regions of the United States." (company website)

CALM stock chart

Sell short

3-Jun-05. Cal-Maine Foods has been trending sharply downward since the beginning of the year (see sidebar). Last week it popped up briefly to near the 50-day moving average, but has fallen back down again this week. Although there was decent volume on the up days, I decided to short the stock.

  • Price momentum (PPO) — while up sharply in recent days, has fallen off again
  • Trend (ADX) — lost strength while buying pressure (+DI) and selling pressure (-DI) criss-crossed, but selling pressure has picked up again
  • Money flow (CMF) — back down into negative territory
  • Relative strength (RSI) — losing strength quickly

Buy to cover

profit Bottom line
+1.8%

1-Jul-05. I decided to cover my position in CALM and put in an order to buy at $5.90. Only half the order executed today.

I am prompted to cover for two reasons. First, I suspect CALM may have bottomed earlier in June when it traded as low as $5.55. This week CALM has closed above the 1-month average four of the last five days and there has been a gradual increase in relative strength (RSI), money flow (CMF), and momentum (PPO). Second, CALM should be releasing annual earnings soon, and a positive surprise could send the stock zooming up. The egg business is notoriously erratic, so I don't want to have too many eggs in this basket, so to speak.

19-Jul-05. I covered the remaining shares of my short position today. It now looks even more likely that I missed the CALM bottom, and earnings are due out soon.


CALM 1-year chart