Keep Pouring! Molson Coors Can Take Some More Froth

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Shares of brewing company Molson Coors (TAP) showed promisingly bullish price action last week that you should be watching for a new trade setup. Last Monday, TAP stock rallied on rumors that Anheuser-Busch InBev (BUD) might be considering buying the world’s second-largest brewer, SABMiller (SBMRY).

beat the bell stock investing adviceDespite denials of the rumor, TAP stock held its gains all week, which at the margin is a bullish development.

The specifics: Anheuser-Busch InBev was rumored to be seeking financing a $122 billion for its longtime rival, SABMiller. An analyst at Stifel also said he sees a 60% likelihood of such a deal taking place by the middle of 2015. Later in the day, however, CNBC journalist David Faber reported that the sources he spoke with denied any talks between the two companies even having taken place.

Often, when such rumors get denied, any stock’s initial enthusiasm often quickly gets erased, so the fact that BUD and TAP held their gains all week is worth following closely. In essence, price action hints that the rumor might still be true.

On the back of the news, investment bank Cowen initiated coverage on Molson Coors the next day with an “outperform” rating and a price target or $89, or about 16% above last Friday’s closing price.

TAP Stock Charts

Looking at the multiyear weekly chart of TAP stock, note that in early 2013 it broke past a multiyear diagonal resistance line. The stock then consolidated into the autumn of that year before making its next move higher, and that move still is taking place.

TAP stock charts weekly
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On the daily chart, note that TAP stock has formed two good higher lows since early August. Also note that after each higher low, the stock gapped higher, thus confirming those lows as important. The post-merger rumor rally on Sept. 15 gapped TAP stock right past its diagonal resistance line around the $75.50 area. On Sept. 16, TAP stock had an intraday selloff, but it quickly reversed higher, thus giving traders a clear support level to focus around near the $75 mark.

For the rest of the week, Molson Coors then consolidated the Monday rally, and by so doing formed a bullish wedge shape, which on a move above the $77.70 area would confirm a breakout.

TAP stock charts daily
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Active investors could thus consider buying the stock on a break above $77.70 with a next price target around $82.

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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2014/09/molson-coors-tap-stock-charts/.

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