Molson Coors Brewing: Cold Filtered, Cold Chart

 | May 05, 2017 | 8:30 AM EDT
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Molson Coors Brewing (TAP) gaped lower the other day breaking key support around $95 and continuing the downtrend that was already in-force since mid-October. This downtrend has further to go, in my opinion, and I will use some charts and indicators to make my case.

In full disclosure, I like to drink beer on a hot summer afternoon, at the Jersey Shore with pretty much any kind of fish or shellfish and lots of melted butter. If Real Money was a menu at a restaurant I would have to put a warning here about raw food. But on to the raw charts...

In this daily chart of TAP, above, we can see how prices peaked back in September/October. Prices rallied in September and October making higher highs along with a pullback toward the rising 50-day average line in mid-September and then a break below that average line by the end of October.

Now look at the performance of the On-Balance-Volume (OBV) line, which only firmed modestly in August and September. The new price high in October only saw a brief uptick from the OBV line and then it quickly retreated. The momentum line shows equal highs in September and October despite the higher price highs for a bearish divergence. That's how the high was made and since then the subsequent price action has been bearish.

In November, TAP broke below the rising 200-day moving average line and over the next three months rallies stopped at the underside of this key average line. A similar move can be seen last month as rallies in TAP failed at the underside of the declining 50-day moving average line. The OBV line was neutral from November to mid-March and then it turned lower again, signaling more aggressive selling. The lower low made this week has not generated a bullish divergence with momentum so further declines are anticipated.

In this weekly chart of TAP, above we can see the top and decline better. Notice how prices have stalled at the underside of the cresting 40-week moving average line. The weekly OBV line has been in a downtrend since October and tells us that there has been a good measure of liquidation.

The Moving Average Convergence Divergence (MACD) is in bearish territory below the zero line and not close to a bullish crossover.

In this Point and Figure chart of TAP, above, we can see a topping pattern as prices rolled over. Notice how $94 held on this chart until it was broken. The potential downside target for TAP is $80.

Bottom line: Summer is coming and I can look for forward to a cold one, but for shares of TAP I would have a cold reception. The $94-$97 area should act as resistance and $80 (the highs back in 2015) is likely to be next major support.

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