Constellation Brands (STZ) , which reports its quarterly numbers next week, has been weakening since early December. Are beer and wine sales slowing? (Not at my house.) Are consumers trading down? (No opinion, but certainly possible.) Let's review the charts and indicators.
In this daily bar chart of STZ, below, I see some problematic moves in the indicators. Prices have been trading below the declining 200-day moving average line since the middle of December. The daily On-Balance-Volume (OBV) line has been weakening since August. The Moving Average Convergence Divergence (MACD) oscillator has made a higher low in March versus January and the indicator is just below the zero line.
In this weekly Japanese candlestick chart of STZ, below, I see what could be a major rounded top formation. STZ trades below the declining 40-week moving average line. The "neckline" of this potential top pattern can be drawn along the $210 line. The weekly OBV line is weak and tells me of months of more aggressive selling. The MACD oscillator is bearish but shows some recent narrowing.
In this daily Point and Figure chart of STZ, below, I can see a possible downside price target in the $153 area.
In this weekly Point and Figure chart of STZ, below, I can see the same $153 price target as the daily chart above. A trade at $204 or $200 could turn this chart bearish.
Bottom line strategy: I don't know if STZ is truly recession resistant but I do know that if prices break much below $204 they are likely to precipitate further declines.
