Brown-Forman Has a Breakout Rally That Ice Won't Dilute

Let's check out the charts and arrive at a price target.

Brown-Forman (BF.A) had a huge rally Wednesday. The distiller of brands like Jack Daniel's jumped to a new high for the move up after its quarterly results came in ahead of expectations, led by underlying sales growth and other factors.

Let's check out the charts with two fingers of Jack (later tonight of course).

In the daily bar chart of BF.A, below, we can see some "interesting" price and indicator movement. Prices declined in February and March with the March low looking like a small double bottom, which is a little different from many stocks that made dramatic "V" bottoms. BF.A rallied into May and traded sideways into late July where more aggressive buying developed.

The On-Balance-Volume (OBV) line shows a decline from January to late June which is interesting. The price of BF.A managed to rally from late March despite this sign of more aggressive selling. In early July the OBV line turns up sharply and is "in gear" with the price action.

The Moving Average Convergence Divergence (MACD) oscillator also turns bullish in early July.  

 

In the weekly bar chart of BF.A, below, we can see a positive picture going back five years. Prices are trading at a new high and above the rising 40-week moving average line.

 

The weekly OBV line moves like the daily line but in this time frame it is close to a new all-time high. The MACD oscillator gave a buy signal in July as it crossed above the zero line. 

 

 

 

In this daily Point and Figure chart of BF.A., below, we can see a potential upside price target of around $81 -- not all that far away. 

 

In this weekly Point and Figure chart of BF.A, below, we can see a longer-term price target of $100, rounding up. 

 

 

 

Bottom-line strategy: BF.A shares are likely to trade sideways in the $75-$70 area before resuming its rally. Aggressive traders could use that period of sideways activity to go long. Risk a close below $65 for now. Our price targets are $81 and $100.

 

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