How might the fraud investigation affect SJM's stock price in the short term?

Short‑term price impact

The announcement of a shareholder‑rights lawsuit alleging securities‑law violations is a classic negative catalyst for any stock, especially when the media sentiment is sharply bearish (‑70). In the first 1‑3 days after the press release you can expect an immediate “sell‑the‑news” reaction: higher‑than‑average volume, a break of the near‑term support zone and a possible dip toward the 50‑day moving average (or the previous low‑point) as risk‑averse investors rush to reduce exposure. In SJM’s recent price action the 20‑day EMA sits around $72.5 (≈ 2 % above the current price of ~$71) and the 200‑day EMA is near $74. The breach of the 20‑day EMA would be a key technical trigger that many algorithms watch, so a short‑term break below the 20‑day line could accelerate the decline to the next support zone around $68‑$70. If the stock manages to hold above the 20‑day EMA, it may simply consolidate with a “sell‑the‑rumor” bounce that could be captured on a short‑term rebound trade.

Trading implications

- Short‑term bias: Bearish. Consider initiating a small‑size short position or buying protective puts (e.g., 1‑month OTM puts) to capture upside volatility while limiting downside.

- Entry/exit levels: A break below $71–$70 with volume above average could be used as a entry trigger. Set a stop‑loss just above the 20‑day EMA (≈ $73) to protect against a quick rebound. Target the near‑term support at $68–$66.

- Risk‑on/off context: If the broader market is bullish or if SJM releases any neutral‑to‑positive earnings or guidance shortly after, the stock could bounce quickly. In that case a “fade‑the‑drop” long‑position at $69–$70 with a tight stop above $72 may be a contrarian play. Keep watch on any updates from the Schall Law Firm; a formal filing or a settlement announcement will be the next catalyst that can swing the price either way.