Are the stars lining up to buy STZ? Here’s my take on Constellation Brands in two timeframes. (October 07, 2015)
I want to look at Constellation Brands ( NYSE:STZ ) today. This is a pretty interesting stock right now and it really reveals time frame. Why are you in a stock? Why do you own a stock? Constellation Brands ( NYSE:STZ ) reported earning this morning and they really crushed estimates. You can see the stock is still up almost 2.5 percent. But here’s the deal, did you buy the stock when it hit the 50-day moving average and started bouncing up because you were making an earnings trade? If that’s the case then you sell into strength.
You’re whole reason for buying this stock was you thought the company was going to report a good number and so you’re going to buy the anticipation, sell the event. You look at the intraday chart and you can see what happened. You weren’t really alone in that. You see this time and time again, look at some of the Netflix ( NASDAQ:NFLX ) earnings, not every single one but here you see the stock pop up, you sell into this strength. Big, big massive volume here, the heaviest in a while. And then the stock rolls over and you’re happy that you sold.
Now you’re looking at the stock, lets see what today’s intraday low was, and we’re still actually watching the stock trade because I’m recording this video with a little less than an hour to go. The stock came back to yesterday’s opening print really, and then started rallying higher. Again, this is your short-term trade, it’s a discipline thing as opposed to an analysis thing. If you’re buying a stock because you expect them to report good earnings then you should have your exit planned. If you plan on exiting on the earnings number then you go ahead and sell.
But there’s more to it than that, and this is why: forget about this intraday move, could just as easily be down at 132.50. But lets zoom out and look at the weekly chart. The weekly chart shows this stock is still in the early stages of a volatility breakout, a breakout from a squeeze. You can see here that the stock has been trading sideways for months. And then it actually broke out, I’ll bet this low was like August 24th because that’s when every stock bottomed. It started to move higher. then it got really upended like everything else did. If you just forget about this bar (tough to do if you were trading it), but if you just kind of forget about that all you see is a stock that is generally trending higher after a pretty significant little intra-period reversal there.
So this is one of those situations where I’m looking at this stock and I think it’s a buy. I think it’s a buy right here, right now,134.72, I’m in. Do you know why? Again, sideways volatility squeeze, a move higher that was profound. Sideways volatility squeeze, yuck, and then a move that was profound. Same thing here, a move that was profound. I don’t even know why I’m using the term profound, but I am, and I’m sure there’s something profound in there. Sideways volatility squeeze, profound move. So short-term you wanted to be getting out of the stock because that’s what day traders do, that’s what swing traders do, you take the money and run and you move on. Or, you wait and put it to work in the same darn stock, only this time with a different price range.
So pick your time frame and apply that time frame to this stock. And you stay long or short, whatever you’re flavor is, you stay long as long as your underlying thesis is, as long as your underlying reasoning for being in the stock remains in tact. When that thesis is disproven, that’s when you want to get out. Here, my thesis is, a trend in motion tends to stay in motion all the way up until the time it doesn’t. This stock is moving higher, I think you need to be a buyer.
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