Boston Beer (SAM - commentary - Trade Now) is breaking out this morning. The beermaker reported a strong quarter last night that inspired a powerful gap-higher open. Boston Beer is now up over 10% on the day and is one of the top five gainers on the NYSE. Volume on the surge is running extremely heavy and is already near triple the stock's 50-day average.
SAM Daily (NYSE)
Boston Beer
Source: TradeStation
This is a sharp reversal from the action earlier this week. Boston Beer opened the week below its 50-day moving average, and by yesterday's gap-lower open, it looked headed for a test of trend line support near $35. The Molson Coors (TAP - commentary - Trade Now)-inspired early weakness yesterday did not last long, though, and Boston Beer finished the day with a 1.3% gain on a big uptick in trade. With the help of today's surge, SAM will leave behind a convincing key reversal on the weekly charts.
SAM Weekly (NYSE)
Boston Beer
Source: TradeStation
I expect the breakout action today to carry Boston Beer up to the $45 area by year end. Along the way, the stock will have to power through the $42 level, which has attracted some supply at today's early highs. This is the area of the August highs but shouldn't be much of a hurdle. Boston Beer has strong support in place near the $40 area. This includes last month's highs as well as upper trend line support of the bullish flag SAM has been tracing out since the Aug. 21 top. I am not in the stock but will be a buyer on a low volume pullback to support.
P.S. Will you be there when Cramer makes his next move?
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At the time of publication, Morrow was had no positions in the stocks mentioned.
Gary Morrow is president of Yosemite Asset Management, LLC, a registered investment advisory firm in San Luis Obispo, Calif. He manages individual accounts through Charles Schwab and runs a long/short hedge fund. Prior to forming Yosemite, Morrow spent 12 years on the floor of the Chicago Mercantile Exchange trading foreign currency and interest rate futures. He holds a bachelor's degree in economics from Ripon College.
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