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Chart Of The Day: What's In A Name? For Constellation Brands, Plenty

By Investing.com (Pinchas Cohen/Investing.com)Stock MarketsApr 13, 2020 10:01AM ET
www.investing.com/analysis/chart-of-the-day-200521407
Chart Of The Day: What's In A Name? For Constellation Brands, Plenty
By Investing.com (Pinchas Cohen/Investing.com)   |  Apr 13, 2020 10:01AM ET
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US500
-0.03%
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STZ
+0.31%
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TAP
+0.56%
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+0.37%
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From mid-March, when the S&P 500 Index climbed less than 25%, beer, wine and spirits maker Constellation Brands (NYSE:STZ) has surged—gaining more than 57.4%. The Victor, NY-based company's most famous product? Corona beer.

Since the COVID-19 outbreak in the U.S. accelerated significantly during that period, we initially thought perhaps Americans were easing their lockdown sorrows with booze. So we compared the stock performance of the top three brewers by market share.

Anheuser-Busch (NYSE:BUD), which owns Budweiser, advanced 38.6% over the same period. Molson Coors Brewing (NYSE:TAP), maker of both eponymously named brands saw similar gains: it added 37.1% during that time. Heineken (OTC:HEINY) accelerated less than 6% at the same time.

As the pandemic spread globally, why then did the maker of Corona beer outperform so dramatically, besting competitive shares, and coming out almost 9% ahead of the runner up, the maker of Budweiser?

STZ Daily
STZ Daily

Other than the irony of the pandemic's generic name, novel coronavirus, to the beer's brand name we couldn't find any fundamental relationship nor a specific technical reason why the stock keeps rising. Perhaps, as people are sheltering in place, there's some sort of satisfaction to cracking open a chilled bottle of the brew and tempting the fates by ingesting something named Corona without needing any personal protective equipment (PPE) whatsoever.

That's just our guess, of course. Whatever the reason, the maker of Corona beer has become a favorite trade amid the coronavirus pandemic.

Trading Strategies

Conservative traders would wait for a take-profit correction, after the price found resistance by both the 50 DMA and the Feb. 28 trough. They’d wait for a confirmation the uptrend remains intact, as the price bounces back from the uptrend line.

Moderate traders might wait for the same pullback, for a better entry, but not necessarily for proof of trend.

Aggressive traders may enter a contrarian short, counting on the corrective move.

Aggressive Trade Sample

  • Entry: $166.70
  • Stop-Loss: $167.70
  • Risk: $1
  • Target: $150.70, above the psychological, round number and March 31 peak
  • Reward: $16
  • Risk:Reward Ratio: 1:16

Note: A trade sample is just an example of diverse types of trades. No one trade is right for every trader nor for every situation.

Chart Of The Day: What's In A Name? For Constellation Brands, Plenty
 

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Chart Of The Day: What's In A Name? For Constellation Brands, Plenty

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Comments (3)
Sam Stone
Sam Stone Apr 13, 2020 12:46PM ET
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Constellation brands has United States rights to Corona. Grupo Modelo makes it and is a sub of BUD
Sanjay Prajapati
Sanjay Prajapati Apr 13, 2020 12:13PM ET
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uptrend
Sanjay Prajapati
Sanjay Prajapati Apr 13, 2020 12:13PM ET
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cup pattern
Pinchas Cohen
Pinchas Cohen Apr 13, 2020 12:13PM ET
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V bottom. Cup pattern is wider and therefore a more gradual bottom.
 
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