Constellation Brands Trades Below Its 200-Week SMA

Constellation Brands, Inc. (STZ) will announce results on Wednesday, Jan. 9, with a P/E ratio of 18.58 and a dividend yield of 1.78%. The stock’s weekly chart is bearish yet oversold.

Constellation Brands owns several beer, wine, and alcohol brands, including the well-known Corona and Modelo beer franchises. The stock ended Monday, Jan. 7, at $170.12, up 5.8% in 2019, but still 28.1% behind its April 30 high of $236.62. The stock is 8.9% higher than its December 24 low of $156.25, indicating that the bear market rally is gaining traction.

Constellation Brands is expected to record profits per share of $2.04 when it reports results before the market opens on Wednesday, Jan. 9. Constellation Brands holds a significant position in Canopy Growth Corporation (CGC), making the company a cannabis sector bet. Modelo and Corona, two iconic beer brands, are among the most popular, so advice for those sectors will be critical. Meanwhile, wine and alcohol sales continue to fall.

The daily chart for Constellation Brands

Constellation Brands has been trading under a “death cross” since Aug. 8, when the 50-day simple moving average fell below the 200-day simple moving average, indicating that lower prices were on the way. This chart followed the stock from $214.41 on that day to a low of $156.25 on December 24. On the chart, there are three horizontal lines: my weekly value level of $155.38, a monthly pivot of $165.22, and my yearly danger threshold of $215.75.

The December 31 closing of $160.82 resulted in $165.22 as my monthly dangerous level, which is computed based on the previous nine monthly closures. Since the stock closed over $165.22 last week, this level has become a monthly pivot. A Suttmeier Pivot has a high possibility of being tested as a magnet again throughout its time horizon, which in this instance is January. My patented statistics provide a monthly level based on closing over the previous nine months.

The weekly chart for Constellation Brands

Constellation Brands’ weekly chart finished last week bearish but oversold, with the company trading below its five-week modified moving average of $178.70. The stock is also trading below its 200-week simple moving average of $173.22, which I see as a “reversion to the mean.” This is significant since the stock has been trading above its 200-week simple moving average since the week of August 19, 2011. After sustaining the 200-week simple moving average at $17.67 in June 2012, the stock soared to an all-time high of $236.62 in April 2018.

The weekly slow stochastic reading of 12 x 3 x 3 is expected to grow to 10.40 this week, up from 8.44 on January 4. As a result, the stock is below the oversold level of 20.00, but it was below 10.00 at the Christmas low, making it “too cheap to ignore.” Following months of rigorous back-testing following the 1987 Crash, I chose the 12 x 3 x 3 weekly slow stochastic reading as the most accurate indicator of momentum. Stochastics are measured from 00.00 to 100.00, with a value over 80.00 indicating overbought and a reading below 20.00 indicating oversold. The value fell below 10.00 as a result of this year’s downward volatility, indicating that the stock is “too cheap to ignore.”

The 12 x 3 x 3 depicts the calculations based on the highs, lows, and closures over the previous 12 weeks. The 3 x 3 represents the modified moving averages, which yields two lines. I solely display and concentrate on the slower of the two. According to the idea, as a ticker climbs, so does the stochastic reading, since it closes the week closer to the week’s high. When this diverges and the closes fall further below the week’s high, the stochastic reading will roll over before the ticker sends an alert to cut holdings. In a sinking market, the opposite happens.

Given this charts and analysis, investors should purchase Constellation Brands shares on dips to my monthly pivot at $165.22, followed by my weekly value mark at $155.38. My plan asks for holdings on strength to be reduced to my yearly hazardous threshold of $215.75.

The author has no holdings in any of the stocks mentioned and has no intentions to start new positions in the next 72 hours.

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