As July 4 quickly approaches, many folks from across the U.S. are putting the finishing touches on their holiday plans. Stereotypically, many plans will likely include buying beer and other alcoholic beverages. While it could be much harder said than done, for investors and active traders alike, the patterns discussed in the paragraphs below suggest that the best plan might be to abstain from buying the products of the various beer companies and opt for buying shares instead.
AdvisorShares Vice ETF (ACT)
The group of companies that conduct business in areas such as gambling, alcohol, and tobacco are known as vice stocks. Investors often look to add exposure to companies in this group because they are often regarded as being less correlated to broad market changes and tend to provide continued growth across all market environments.
Taking a look at the chart of the AdvisorShares Vice ETF (ACT), you can see that the price has been trading within a defined channel pattern for most of 2019. Based on technical analysis, it is interesting to note how the 200-day moving average (red line) has been able to prop up the price on several attempted pullbacks. This type of support suggests that the bias is to the upside and that traders will be keeping a close eye on whether the price is able to move above $25.50, which could trigger a surge in momentum. From a risk management perspective, stop-loss orders will likely be placed below $24.55 in case of a sudden shift in sentiment.
The Boston Beer Company, Inc. Class A (SAM)
Taking a look at the holdings of the AdvisorShares Vice ETF, it is not too difficult to spot the favorable weighting of the fund toward beer companies such as The Boston Beer Company, Inc. Class A (SAM).
Taking a look at the chart, you can see that the stock has been trading within a strong long-term uptrend and that the price has recently been able to test several key levels of support and resistance. The recent break beyond $350 suggests that the momentum is obviously in favor of the bulls. Based on this technical perspective, without other levels of identified resistance standing in the way of a move higher, the sharp rise could be poised to continue for much longer than some would expect.
Anheuser-Busch InBev SA/NV ADR (BUD)
Anheuser-Busch InBev SA/NV (BUD) is the world leader when it comes to the sale of beer. With over 500 brands and countless beer varieties, the company is unmatched in terms of scale.
Taking a look at the chart below, you can see that the price recently moved above the 200-day moving average and is trading within a defined range. Traders will be looking to the recent crossover between the 50-day and 200-day moving averages as a signal of the early stages of a long-term uptrend. A break beyond the nearby trendline could act as a catalyst for sending the price higher, and stop-losses will most likely be set below $85.31 or $79.42, depending on investment horizon and risk tolerance.
The Bottom Line
Demand for beer and related products is likely to increase over the coming days, with the holiday and summer vacation plans around the corner. As mentioned above, for traders, the best bet might be to steer money away from the company's products and into the shares instead.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.