How To Trade Constellation Brands, Which Has Been Rising Since Beating Earnings Estimates

Constellation Brands

STZ
set its 52-week high of $258.00 on January 6 on a positive reaction to its earnings reported that day. The low for this day at $242.66 was below the prior day’s low, which was a “key reversal.” This led a decline of 19.5% to its February 24, 2022 low of $207.60.

The stock rallied from this low thanks to a positive reaction to earnings reported on April 7. STZ traded as high as $246.50 on April 7. Constellation Brands has quarterly and annual risky levels at new highs at $293.91 and $306.08, respectively.

The beverage company offers beer, wine and spirits and they indicated demand for beer and wine was strong. Spirit sales were considered steady.

STZ has a p/e ratio of 26.57% with a dividend yield of just 1.02%. The company beat earnings estimates in its last two quarters after missing the prior two quarters.

The Daily Chart for Constellation Brands

Constellation Brands traded as low as $160.63 on October 30, 2020 and rallied 52% to as high as $244.75 on May 5, 2021. This was followed by a decline of 15.2% to a low of $207.35 on September 7, 2021. The rebound from this low to the January 6, 2022, high of $258 totaled 24.4%. The 2022 decline to $207.59 on February 24, 2022, totaled 19.5%. We are now in a 18.7% rally to $246.50 on April 7.

The 50-day and 200-day simple moving averages have crisscrossed twice and may be doing so again now. These signals should be ignored as a trading range is more likely for this stock.

The horizontal line at $226.54 is the value level for April. The horizontal line at $192.81 is the semiannual value level. Remember that the quarterly and annual risky levels are above the chart at $293.91 and $306.08.

The Weekly Chart for Constellation Brands

The weekly chart for Constellation Brands has been positive since March 25. The stock is above its five-week modified moving average at $233.71. The stock is well above its 200-week simple moving average or “reversion to the mean” at $202.41. The 12x3x3 weekly slow stochastic reading is rising at 55.74. Remember that stochastic readings scale between 00.00 and 100.00, with readings above 80.00 overbought, and readings below 20.00 oversold.

Trading Strategy: Buy Constellation Brands on weakness to its monthly value level at $226.54. Reduce holdings on strength to its quarterly risky level at $293.91.