Anheuser-Busch Stock Could Be Set Up for a Decline

Anheuser-Busch InBev SA/NV (BUD), the alcoholic beverage giant, is running into some troubles on its price chart. The main problem is its 200-day simple moving average (SMA).

This is a key level that most investors track to get a reading on whether or not the stock is trending higher or lower. With Anheuser-Busch below its 200-day SMA, this is a stock that has been trending lower.

As the stock tries to bounce higher, when it approaches this key level, some investors view it as overbought and push it even lower. Right now, this stock is testing that key level, and the 200-day SMA is acting as resistance.

Shares also happen to be trading right at the previous highs for the stock since June at just under $60 per share. This is adding resistance at this point when the stock is testing its 200-day SMA.

To top it off, this major test for the stock, testing the horizontal red line on the chart and 200-day moving average in yellow, is coming during a counter-trend move. Take a look:

Chart showing the share price performance of Anheuser-Busch InBev SA/NV (BUD)

Before Anheuser-Busch's latest rally, the stock was clearly in a downtrend. That makes the recent move higher a counter trend to the longer-term trend for the stock. And you never want to fight the trend.

With prices stuck right in the middle of this counter-trend channel, there's a growing case that shares are about to plunge from here. The major support level, in green, represents over a 10% drop from current prices – and that may not be the bottom.

A counter-trend move gets the bulls swept up in the stock again, only to punish them as shares drop sharply. However, the beverage giant isn't likely to fall as much as it did due to the economic shutdown, which sent the stock price to $33 per share.

The Bottom Line

Anheuser-Busch InBev is going against the long-term trend of the stock. This isn't likely to hold. With the stock hitting a key resistance level along with resistance at its 200-day SMA, shares could be set to fall double digits in quick fashion.

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