For his final "Executive Decision" segment of Mad Money Thursday evening, Jim Cramer checked in with Bill Newlands, president and CEO of Constellation Brands (STZ) , the wine and spirits maker that just posted a monster 67-cents-a-share earnings beat on a 9% rise in revenues.
Newlands attributed the strong quarter to the strength of their brands. He said that in times of uncertainty, consumers turn to brands they trust.
When asked about the growing popularity of hard seltzer, Newlands noted that Constellation had just one type of hard seltzer last year, but managed to sell 10 million cases of it. He said they will be offering other flavors in the near future. Newlands was also optimistic about the company's investment in Canopy Growth Corp. (CGC) , saying that the company is positioned to win as cannabis gains additional legalization.
We reviewed the charts on October 2 and wrote that "The market is a discounting mechanism. A stock that does not rally on what seems to be good news is suspect as traders either already discounted the news or they sense weaker conditions ahead. I continue to recommend a reduced long exposure on STZ." Prices continued to weaken into the end of the month and have since turned up sharply.
Let's check out the charts and technical indicators.
In this updated daily bar chart of STZ, below, we can see that prices "turned on a dime" at the beginning of November and rallied strongly. STZ is now firmly above the rising 50-day moving average line and above the rising 200-day moving average line.
The On-Balance-Volume (OBV) line turned high from November and recently made a new high for the move up telling us that buyers of STZ have been and are more aggressive.
The trend-following Moving Average Convergence Divergence (MACD) oscillator is poised to turn upwards for a new outright buy signal.
In this weekly bar chart of STZ, below, we went back five years to get some perspective. Here we can see that prices have broken a downtrend from early 2018. STZ is above the 40-week moving average line which recently turned positive.
The OBV line has been quietly improving the past two months and could soon make a new high. The MACD oscillator has been bullish from November.
In this updated daily Point and Figure chart of STZ, below, we can see a potential price target of $297, or let's call it $300, as stocks tend to be attracted to big figures/round numbers.
Bottom line strategy: Traders should look for a pullback towards $220 as a chance to go long risking to $200. $300 is the price objective.
