Brewing up a trade in Craft Brewers Alliance

• Posted by Greg Harmon
• on June 2nd, 2015

Craft Beers are hot. Everybody wants to get in on the action. Who wants a Lite Beer when you can have a Grapefruit Sculpin IPA from Ballast Point Brewing Company? Not me. The only time I will touch a Budweiser or Bud Light is at a baseball game when I am too lazy to leave my seat to get a beer.

What might be a bit peculiar then is that the stock price of one of the few that are public, Craft Brewers Alliance ($BREW) has been struggling for quite some time. The chart below shows the last 12 months price action. In it you can see the peak in October 2014 followed by a sell off, more consolidation then another sell off of equal depth. This was met by a slow rise back to the consolidation zone before another quick sell off, also the same depth.

Since May it has been consolidating. And that has occurred between the 10.85 level that was support in January and July through August on 2014, and the 10.10 area that was support in June 2014.On the surface this looks it is on the precipice of a major breakdown, even after falling over 40% from the peak. Another move of $3.50 out of this consolidation would take it down to about $7. In fact, the weekly chart gives another reason for this with a bullish Bat harmonic that has a Potential Reversal Zone (PRZ) at 7.12 below.

With the Bollinger Bands® starting to tighten it could be time for a move. But the momentum indicators suggest it may have bottomed. The RSI is moving back higher and the MACD has crossed up, as they did before the last retracement of the move to 10.85. So will it move back up to 13 and fill the gap, or break the consolidation to the downside and travel to 7?

The short answer is, nobody knows. But a break of that consolidation area will give a major clue. And with those tightening Bollinger Bands it is time to pay attention. Now you know what it means when a technician tells you they do not care which way a stock or index moves. If you are prepared, any movement presents an opportunity.

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