It’s time to take profits, two experts say

The top name in ketchup is finally playing catch-up.

Kraft Heinz shares surged more than 13% on Thursday after the consumer food giant posted a better-than-expected earnings report, a meaningful move higher for a stock still down over 25% year to date.

The pop came as welcome relief for shareholders, who have watched the stock lose some 63% in value since the start of 2017.

But if you ask Craig Johnson, senior technical research analyst and managing director at Piper Jaffray, that’s all this is: a relief rally.

“That’s exactly how I would phrase it,” he said Thursday on CNBC’s “Trading Nation.” “We’re up over 12% today, but when you look at the chart, all we’ve done is we’ve come back up toward our 40-week moving average and an overall declining resistance line.”

To Johnson, that means this particular move can’t be trusted.

“I need to see a clear reversal here on the charts before I can get a lot more excited about this stock and behind the stock at this point in time,” he said. “So, I’d be actually using this strength as an opportunity to be trimming positions because I don’t see us breaking through and we’re too short-term overbought at this point in time.”

Michael Binger, president of Gradient Investments, took a similar stance Kraft Heinz, whose brands also include Oscar Mayer and Lunchables.

“A lot has happened to Kraft,” he said in the same “Trading Nation” interview. “Think about it: [The] stock’s gone from 80 to 30, it’s had a ratings cut, the dividend cut, profitability has declined.”

It’s been so bad that, after seeing Thursday’s higher-than-anticipated earnings and profitability results in addition to the company’s 5% dividend yield, investors may believe “this new CEO [Miguel Patricio] has put some stabilization into the company,” Binger said.

“But when we look at it, we’re not buyers here just yet,” Binger said, adding that the fundamental problems that took the stock to all-time lows — including industry competition, several billion dollars in debt and still-pending asset sales — are still there.

“As it stands right now, we would stay away and we would be inclined to take profits if you did hold it at this point right now, and just wait until next year and see how this thing plays out a little further,” he said.

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