They've gone from a record intraday high of $236.62, set during the week of May 4, 2018, to their 2019 low of $150.37 on Jan. 9.
My call is to buy the stock down to its "reversion to the mean," which is its 200-week simple moving average at $180.93.
The stock has been rising with this moving-average trend since the week of Dec. 21, when the stock bottomed.
This year it's been recovering, up 15% year to date. Since the Jan. 9 low of $150.37, the stock is in bull-market territory, up 23%.
The Victor, N.Y., company -- with brands including Corona beer, Robert Mondavi wines and Paul Masson brandy -- reports earnings before the opening bell on Friday, June 28.
Analysts expect Constellation earned $2.09 a share in the fiscal first quarter ended May 31.
The stock is reasonably priced at a price-to-earnings multiple of 19.82 and dividend yield of 1.63%, according to Macrotrends.
Its business has been buoyed by beer brands from Mexico. Placing tariffs on Mexico due to border issues has been averted. Keep an eye out for guidance on Corona Premier, which is a major addition to Constellation's brand portfolio.
Constellation has a strategy of building brands through acquisitions, but it also liquidates brands that drag at the cash register. The company has been struggling with its wine and spirits inventory and recently divested over 30 brands valued at $1.7 billion.
The Daily Chart for Constellation Brands
Courtesy of Refinitiv XENITH
Constellation Brands is trading below its 100-day simple moving average at $189.65, which is a near-term target on a positive reaction to earnings. The close of $160.82 on Dec. 31 was input to my proprietary analytics, and its annual risky level at $215.75 is a second-half-of-2019 price target. The stock's 2019 high is $214.48, set on April 25, and since then is in correction territory 13.7% below this high.
The Weekly Chart for Constellation Brands
Courtesy of Refinitiv XENITH
The weekly chart for Constellation Brands is negative with the stock below its five-week modified moving average of $188.87. The stock is above its 200-week simple moving average or "reversion to the mean" at $180.93 which is my buy level. The 12x3x3 weekly slow stochastic reading is projected to fall to 46.04 this week down from 51.66 on June 21. Note that at as May began this reading was 90.29 above 90.00 as an "inflating parabolic bubble" that popped providing the buying opportunity at the 200-week SMA.
Trading Strategy: Buy weakness to the 200-week SMA at $180.93 and reduce holdings on strength to its annual risky level at $215.75.
July 4th Sale: Join Jim Cramer's Club for Investors and Save
How to use my value levels and risky levels:
Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31. The original semiannual and annual levels remain in play. The weekly level changes each week; the monthly level changed at the end of January, February, March, April and May. The quarterly level was changed at the end of March. My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.
The close on June 28 is the second most important for 2019. This close is an input to my proprietary analytics and will generate new weekly, monthly, quarterly and semiannual levels.
How to use 12x3x3 Weekly Slow Stochastic Readings:
My choice of using 12x3x3 weekly slow stochastic readings was based upon back-testing many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years. The stochastic reading covers the last 12 weeks of highs, lows and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading and I found that the slow reading worked the best. The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered overbought and readings below 20.00 considered oversold. Recently I noted that stocks tend to peak and decline 10% to 20% and more shortly after a reading rises above 90.00, so I call that an "inflating parabolic bubble" as a bubble always pops. I also call a reading below 10.00 as being "too cheap to ignore."
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.