Reading the Market Through the Alcohol Cycle
- Posted by Greg Harmon
- on November 8th, 2012
There are many indicators trader and investors use to help read the market and make decisions. The Relative Strength Index (RSI), Fibonacci support and resistance levels, trendlines and Ichimoku Clouds to name a few. I even wrote about the Percentage of Stocks Above their 200 day Simple Moving Average (SMA) yesterday. But here is one you likely have not heard of. Where are stocks on the Alcohol Cycle.
The Alcohol Cycle
No doubt you will recognize the red labels of the Market Cycle, and I have added the corresponding labels for the Alcohol Cycle. This cycle is measured as which types of Alcohol stocks are peaking and starting to roll over. Take a look at the chart for Craft Brewers Alliance, $BREW. As a representative of the premium Beer category it is now in full blow puking mode and may be overdone. The RSI is technically oversold, with a strong red candle on oversized volume. Look for
Craft Brewers Alliance, $BREW
support at the 6.00 to 6.20 area. Molson Coors Brewing, $TAP, is another good example. Look for a bounce near 40. This means that the next group of Alcohol stocks to roll over is the working man’s beers. Anheuser-Busch inBev, $BUD, the makers of Budweiser is a great example. And these are starting to roll over. The chart for $BUD below shows it breaking through the 100 day SMA with a bearish RSI, not yet oversold, as it moves lower. There is support at 80.50 and then
Anheuser-Busch inBev, $BUD
76.40 before a gap to fill at 73.79. Another example in this group is AmBEV, $ABV, which could gain downside momentum under 39.50. As people abandon premium beers and then working class beers, they turn to hard liquor to quench their depression. And these stocks may be just starting to turn, signalling a market bottom. Diageo, $DEO, printed a Shooting Star reversal candle Wednesday that was confirmed Thursday with a RSI that is starting to trend lower and a Moving Average Convergence Divergence indicator (MACD) that is crossing to negative. A break below the
blue box and 50 day SMA at the 112 area would confirm the bottoming process. That would leave only a rollover in the wine stocks as a signal to start buying. The chart of Constellation Brands, $STZ, is close to that set up. The RSI is bullish but cracking the mid line from above heading towards bearish territory. Price is converging back toward a flattening 50 day SMA. Watch for a break under 34 as the key for this to move lower with support at 32 next.
Constellation Brands, $STZ
Join the Dragonfly Capital Views Premium Membership
Sign up here to get deeper analysis and nearly 50 trade ideas every week.
If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
Dragonfly Capital Updates
- With The US Market in the Dumps Turn To China (Part III)
- Testing the Waters With Celgene
- A Long Term View On…. The Redux of 2013
- Premium Earnings 12-5-13
- 4 Lessons From A Glance Back at 2013
- The PC is Dead, Long Live PC Stocks
- Premium Earnings 12-4-13
- With The US Market in the Dumps Turn To China (Part II)
- With The US Market in the Dumps Turn To China (Part I)
- Premium Earnings 12-3-13