In his "Executive Decision" segment of Mad Money Wednesday evening, Jim Cramer spoke with Bill Newlands, president and CEO of Constellation Brands (STZ) , which delivered strong quarterly results. The numbers included a 10.7% rise in beer sales and 16% organic growth in its wine and spirits business.
(For more on STZ, see: Jim Cramer: With Reopening Spirits High, I'm Looking at Constellation Brands)
Newlands said now that the economy is reopening, Constellation is seeing tremendous demand for all of their products. Modelo is now the No. 2 beer brand in the country with lots of room to continue growing. Meanwhile, Pacifico is proving to have lots of appeal with GenX consumers and is now the fourth fastest growing beer brand.
Constellation is also seeing a lot of success in the hard seltzer category. The company sold 10 million cases with just a single SKU last year, Newlands said.
Newlands added that Constellation remains committed to shareholders as well. The company has pledged to return $5 billion to shareholders, mostly in the form of share buybacks.
Let's see how the stock is performing on the charts. In our June 24 review we wrote that "Aggressive traders could go long at current levels if they can risk a decline to $205." So far this is working.
In this updated daily bar chart of STZ, below, we can see that prices rallied Wednesday but closed near the lows of the day and unable to hold above the declining 50-day moving average line. The slope of the 200-day line is positive and the line intersects around $216.
The On-Balance-Volume (OBV) line has been stalled since February but shows some improvement from the middle of June. The trend-following Moving Average Convergence Divergence (MACD) oscillator is below the zero line but crossing to the upside for a cover shorts buy signal.
In this weekly Japanese candlestick chart of STZ, below, we can see some dojis in April and May and an upper shadow in the latest candle pattern. This gives me an impression that prices have trouble in the $240 area. Prices are in a longer-term uptrend above the rising 40-week moving average line.
The weekly OBV line has chopped sideways since March and the MACD oscillator is pointed down in a take profit sell signal.
In this daily Point and Figure chart of STZ, below, we see two interesting points. The software is projecting a downside price target in the $202 area and the volume by price bars on the left scale suggest overhead resistance.
In this weekly Point and Figure chart of STZ, below, we used a five box reversal filter. Here a longer-term price target of $391 is being projected. A trade at $248 is needed to refresh the uptrend.
Bottom line strategy: If STZ had closed strong on Wednesday I would have a more bullish opinion of the charts now. Traders could maintain longs but raise stop protection to $225 from $205. Strength above $248 will turn things more positive should it develop. Let's watch this one closer.