A sell-side firm downgraded shares of Anheuser-Busch Inbev ( BUD) Thursday to "underperform" from "neutral" (i,e. to sell from hold). Soccer fans in Qatar were left high and dry on the last-minute decision to ban alcohol at World Cup stadiums.
Let's put the headlines behind us and focus on the price charts and a cold one.
In the daily bar chart of BUD, below, I see a strong rally that has begun to fail. The shares are still above the popular moving averages but these are lagging indicators. The trading volume declined from early November into December as prices soared suggesting there was little underlying strength.
The On-Balance-Volume (OBV) line moved up but stalled at its July high and did not confirm the price gains. The Moving Average Convergence Divergence (MACD) oscillator has crossed to the downside for a take profit sell signal.
In the weekly Japanese candlestick chart of BUD, below, I see a vulnerable rally. Prices are still in an uptrend above the 40-week moving average line but trading volume shrank instead of expanding.
The weekly OBV line moved up but not enough to impress. The MACD is trying to cross the zero line but could be blocked.
In this daily Point and Figure chart of BUD, below, we can see that the shares reached and exceeded an upside price target in the $53 area.
In this weekly Point and Figure chart of BUD, below, we can see a longer-term price target in the $93 area -- that's a lot of six-packs from here.
Bottom-line strategy: Momentum tends to peak before prices do. That condition exists on BUD so longs should be very careful and protect their profits. Maybe even consider switching to wine.
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Let's examine how once-hot bull market stocks can fall in a bear market, and why it's no time for complacency.
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