Constellation Brands, Inc. (STZ) owns many brands of wines, spirits and beers, and the stock has been a strong performer in recent years. Brand sales momentum has stalled so far in 2018, and therefore, shares have moved sideways. Technical momentum will stall unless there is a positive reaction to earnings when the company reports results before the opening bell on Thursday, March 29.
While the stock is down 4.4% year to date, it closed Tuesday, March 27, at $218.47, extending a 6.8% run since setting its 2018 low of $204.60 on Feb. 9. The stock is 5.8% below its all-time intraday high of $231.83 set on March 12.
Analysts expect Constellation Brands to post earnings per share of $1.74 when it reports results on Thursday. Some say that, despite weakening beer sales in general, sales of iconic brands Modelo and Corona will be a head above the rest. Constellation Brands' beer sales could thus offset slowing sales in the wine and spirits segments. The company is implementing its plans to expand deliveries to additional channels such as convenience stores. (For more, see: Constellation Brands Begins 2018 With a Mojo Buzz.)
The daily chart for Constellation Brands
Constellation has been above a "golden cross" since April 17, 2017, when the stock closed at $170.12. A "golden cross" occurs when the 50-day simple moving average rises above the 200-day simple moving average and indicates that higher prices lie ahead. This has been case for shares of Constellation, as this positive signal tracked the stock to its all-time high of $231.83.
There are three horizontal lines at the top of the chart. My weekly value level is $217.16, with my quarterly pivot of $223.93 and my monthly risky level of $230.40, which was tested at the March 12 high. My annual value level at $206.21 held at the Feb. 9 low.
The weekly chart for Constellation Brands
The weekly chart for STZ shares will be negative if the stock ends this week below its five-week modified moving average of $221.28. The stock is well above its 200-week simple moving average of $148.65, which is the "reversion to the mean," last tested during the week of June 15, 2012, when the average was $11.67. The 12 x 3 x 3 weekly slow stochastic reading is projected to slip to 69.24 this week, down from 70.79 on March 23.
Given these charts and analysis, investors should buy Constellation shares on weakness to my weekly and annual value levels of $217.16 and $206.21, respectively, and reduce holdings on strength to my monthly risky level of $230.40. (See also: Top 4 Beer Stocks for 2018.)