Constellation Brands, Inc., together with its subsidiaries, produces, imports, and markets beer, wine, and spirits in the United States, Canada, Mexico, New Zealand, and Italy. The company sells wine across various categories, including table wine, sparkling wine, and dessert wine. Its principal brands comprise Arbor Mist, Black Box, Blackstone, Clos du Bois, Estancia, Nobilo, Ravenswood, Robert Mondavi, Ruffino, Black Velvet Canadian Whisky, and SVEDKA Vodka.
Take a look at the 1-year chart of Constellation (NYSE: STZ) below with my added notations:
STZ has been trending consistently higher since its February drop, and during that time the stock has formed a trendline of support (blue). In addition, the stock had also created at 52-week high resistance level at $168 (green) over the past 3 months. At some point, STZ was going to have to break one of those two levels, and earlier this week the stock broke resistance.
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The Tale of the Tape:: STZ broke above resistance. A long trade could be made on a pullback down to the $168 level, or on a fall to the trendline, with a stop placed below the level of entry. A break below the trendline could be an opportunity to get short the stock.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach