Diageo, the London-based multinational alcoholic beverages company, has some phenomenal strategic brands, all of which you can see by clicking here. The stock has had a tremendous run since March 2009, and recently defied the broad market correction from September through November by surging to all-time high after all-time high. With the holiday season in full swing and two more weeks left of trading before New Year’s Eve, the case for going long DEO may very well be present for a quick trade under the thesis that plenty of people will be celebrating with the good stuff.
Nonetheless, the first chart below of the monthly timeframe reveals a very steep angle of ascent, especially for a firm in a fairly defensive sector. Moreover, note the long shadow printed at the top of last month’s candle, indicative of an aggressive reversal outside the upper monthly Bollinger Band. Also consider the distance between price and the rising 20 period monthly moving average, denoted by the light blue line. Finally, in the second chart below note that the weekly RSI cracked below 70 for the first time since August, indicating the sustained overbought conditions are cracking a bit.
I believe DEO is setting up to be faded into New Year’s, with a buy-cover stop above $122.
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