Constellation Brands, Inc. (NYSE:STZ), the alcoholic beverage company, has seen its shares pull back in recent weeks on the back of decelerating sales in the usually strong month of May. Weather may have been a good part of the reason for the slowing sales, which saw STZ stock pull back to a technically important area of support.
The price action over the past two days suggests that the stock may be ready to push higher again from here.
Between Cinco de Mayo, Memorial Day weekend and a general summer feel, the month of May tends to be good for alcoholic beverage sales for Constellation Brands. But this year (as analysts were quick to point out), the weather in the United States by and large was less than favorable, with lots of rain and relatively cool temperatures. As a result, fewer people had the urge for big outdoor grill parties and thus didn’t splurge on alcoholic beverages. ‘
With weather looking better now and as summer is slowly but surely being felt across the country, sales should be ready to climb again.
Constellation Brands (STZ) Stock Charts
Moving over to the charts, you likely won’t find many stocks with better-defined upward trends than what STZ stock has been displaying for the past few years.
On the multiyear weekly chart, note that much of the rally since 2013 has taken place in a well-defined channel, which at the lower end is supported by its yellow 50-week moving average. This type of multiyear trend not only helps us determine where a trend may be over if and when support gets broken, but it also tells us where a stock may be near-term overbought or oversold.
In the bigger sense, the lower red dotted line and the 50-week moving average, which currently come in around the low $140s, act as critical support. That level also acts as a first downside target should we see further weakness in the near-term.
On the daily chart, we see that since topping out in the first half of May, STZ stock pulled back around 10% into Tuesday’s lows, where the stock reached a technical confluence area of support. In other words, around the $150 mark, this stock has technical support made up of its blue 100-day moving average and the black diagonal support line.
On Tuesday, the stock attempted to break below this support area but reversed back off the lows on the day. This was followed on Wednesday by a nearly 2% rally, which acted as confirmation buying after Tuesday’s failed breakdown attempt.
So, active investors and traders have a well-defined area of support around the $150 mark against which they can play the stock to the upside into $160-$165. Any daily close below $150, and an opportunity could set up to short the stock for a move into the low $140s.
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