In todayâs edition of the Daily Stock Report, we take a look at Saputo Inc (SAP.TO), a global dairy processing consumer staples company. Saputo resides in the favoured zone of many of the SIA reports it is a component of, particularly the various consumer staples reports found on the SIA Platform. Recently, SAP.TO moved into the favoured zone of the SIA S&P/TSX 60 index report. This move continues an upward trend which started in August when it moved out of the red unfavoured zone where it sat for more than 2 years. With the market volatility over the past month or so, this may indicate rotation into defensive sectors as a safe haven. As of Fridayâs close, Saputo sits in the favoured zone in the 13th spot, up 10 spots from last month, and 7 spots in the last quarter. This highlights the strength of SIA Chartsâ relative strength rankings in assisting investors with identifying stocks and sectors that are outperforming their peers or index benchmarks. Outperformance typically indicates positive investor expectations for a company or sector.
Looking at the long term 15 year monthly candlestick chart, a major breakout appears to be underway in Saputo (SAP.TO) shares. After an initial runup from 2010 to early 2017, when the shares trended in a steady uptrend from $10 to a high of $40, the shares then exhibited a declining series of highs and lows which is visible over the past 8 years. Shares declined from $40 to $22, where they ultimately bottomed earlier this year, which was also the low in 2022, making them poor investments even for long-term buy-and-hold advisors. Since bottoming out in January, the shares reversed, ultimately breaking above the declining wedge pattern once they moved above the $33 level. The last November monthly candlestick has been extremely bullish as the shares closed the month near the monthâs high. Another inflection point is approaching as the shares challenge the long term high at the $42 level. This is the next resistance level. If the shares continue to maintain strength and move through $42, the next resistance above this level will be at the $50 round number. The price action ahead will determine whether the shares stall at this long term resistance level or if the uptrend continues.
When analysing the point and figure chart at a 2% scale to identify more precise support and resistance levels, the pattern shows a predominantly wide, sideways, trendless formation with a classic double bottom at the $22.00 level, visible in both the 2022 and Jan 2025 time frames. Since the beginning of the year, the shares have been in a strong rising column of Xâs lasting 25 boxes without a 3-box reversal in place. Saputo is quickly approaching its long term resistance level at $40.63, a level it bumped its head at three times in October 2016, February 2017, and November 2017. This is an important level to monitor as it may represent formidable resistance. With a SMAX of 9 out of 10, the shares are showing good near term strength against the asset classes. With such a large move year to date, if the shares pause to digest the gain, support will be found at the 3-box reversal of $36.08. Next support, should the shares fail at the 3 box reversal point, can be found at $34.00. If the shares can maintain strength and break above the forthcoming resistance at $40.63, the next resistance will be at $48.56 based on a measured move. At present, the shares are exhibiting a positive Spread Triple Top pattern.
Saputo is a global dairy processor domiciled in Canada (28% of fiscal 2022 sales) with operations in the United States (43%), the U.K. (6%), and other international markets (23%). It sells cheese, cream, fluid milk, and other dairy products. In the retail segment (50% of revenue), its mix of brands includes Saputo, Armstrong, Cheer, Cathedral City, and Frylight. Saputo also competes in food service (30% of revenue) and industrials (20% of revenue), which houses its ingredients business.
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