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Constellation Brands Jumps on Earnings. Can It Break Out?

Constellation Brands is moving higher on earnings but still has a big level of resistance overhead. Can the stock break out?

Shares of Constellation Brands  (STZ)  were climbing Wednesday, up 4.2% after better-than-expected third-quarter earnings.

It’s been a bumpy ride so far in the day, but for now bulls are winning the battle. Shares gapped higher at the open and flushed down to negative territory, before the stock found its footing and rallied higher.

Earnings of $2.14 a share beat estimates by 30 cents, while revenue of $2 billion grew 1.5% year over year and topped expectations by $50 million.

A blowout quarter? Not necessarily. But investors have been waiting for some positive news to take Constellation Brands higher, while the charts have been cooperating more on the long side. Shares still face some overhead resistance, but if the stock can clear it Constellation could gain momentum.

Let’s look at the charts.

Trading Constellation Brands

Daily chart of Constellation Brands.

Daily chart of Constellation Brands.

Above is a daily chart of Constellation Brands stock. It’s not hard to see that $190 has been acting as resistance over the past few weeks. Shares continue to chop just below this area, looking for anything to make it burst.

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Will earnings be the catalyst? The report certainly could give bulls the boost they are desperately craving, but my concern is less with $190 and more with the 200-day moving average.

Sure, a breakout over $190 may gave bulls some temporary satisfaction with a “sugar-high” rush, but the 200-day has played a much more significant role over the past year, as shown via purple arrows on the charts.

If Constellation Brands stock can break out over $190 and the 200-day moving average, then bulls will certainly be in control. Over the 200-day puts $200 on the table. If bulls maintain momentum, a gap-fill up toward $205 is possible too.

Should Constellation shares fail to penetrate $190 or if the 200-day moving average stymies its advance, investors should know the downside levels as well. On a pullback bulls will want to see uptrend support (blue line) buoy the name if the 20-day and 50-day moving averages don't support it.

Below uptrend support puts the Wednesday low on the table, followed by the December low of $179. If Constellation falls below that mark, the $175 level is possible.

Weekly chart of STZ stock.

Weekly chart of STZ stock.

Below $180 also puts the stock below a longer-term uptrend mark and the 200-week moving average, as shown on the weekly chart above. On a rally, look to see if Constellation Brands can clear its long-term downtrend resistance mark (blue line).

It’s important to examine stocks on multiple timeframes, but don’t overcomplicate matters. For Constellation Brands, see if it clears $190. If so, the 200-day moving average is on deck, followed by $200. If resistance holds, see if uptrend support buoys the name. Below and the situation gets a bit iffy.