The wine, beer and spirits giant Constellation Brands ( STZ) is due to report its latest quarterly figures before the start of trading on Wednesday, Oct. 6.
Let's check on the charts and indicators. I trust you are over 21.
In the daily bar chart of STZ, below, we can see that the shares rolled over in April/May and have declined into early September. Prices steadied in the back half of September and have been testing the underside of the declining 50-day moving average line.
The trading volume looks like it has increased in the past two months and that could be a subtle sign that investors are returning to the buy side. The On-Balance-Volume (OBV) line weakened from early April to the middle of September telling us that sellers of STZ have been more aggressive. The Moving Average Convergence Divergence (MACD) oscillator made a turn to the upside in August for a cover shorts buy signal.
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In the weekly Japanese candlestick chart of STZ, below, we can see a shifting picture. If you look closely you should see some recent lower shadows below $210 as traders rejected the lows. The 40-week moving average line is above the market and cresting.
The weekly OBV line only shows weakness from July unlike the daily OBV line which has been declining since April. The MACD oscillator is below the zero line but it has been narrowing in recent weeks. Narrowing will always precede a crossover.
In this daily Point and Figure chart of STZ, below, we can see a possible downside price target in the $198 area. A trade at $220.28 should improve the picture.
In this weekly Point and Figure chart of STZ, below, we used close-only price data and a five-box reversal filter. Here, the $482 area is a potential price target.
Bottom-line strategy: Our advice to traders on July 1 was, "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." Traders would have been stopped out in July.
I have no special knowledge of what STZ is going to report on Wednesday, however, the charts have improved recently and that makes me feel optimistic about the stock in the fourth quarter. Traders could go long again above $220.
