Diageo PLC is usually a loved company among fundamental investors. It owns solid products and brands such us Smirnoff, Bailey’s, Johnnie Walker, and J&B, just to name a few.
Alcoholic drinks fit well in all kinds of scenes. If we are happy, we drink to celebrate; and if we are sad, we do it to forget.
Its price is now (this article was written on August 18 before the market closed) at 2,634.5. This is an attractive price considering that more or less a year ago, in September 2019, it was at its top at 3,633.5.
From that moment, the price started to go down; and during the COVID-19 crash, it reached a low at 2,586.5. Now it seems to have recovered, but is it a good time to buy?
Although it is true that the rise from 2,586.5 to 2,634.5 has been interesting, the truth is that Diageo PLC has not surpassed any of its previous tops, not even the descendent line that connects them.
It is true that we could be right before the moment Diageo starts to climb; but as we always say, we have to work with probabilities because we cannot know what is going to happen. If we think that a technical analysis has some kind of predictive power related to probabilities, our opinion is that now is not a good moment to invest. If in some weeks we see it touching the sky, we will just need to assume that sometimes you have to leave past opportunities in order to manage the risk.
While Diageo PLC does not surpass the line that connects the descendent tops in the last months (more or less at 3297.6 and 2983.4) after the week’s close, we would not dare to think that this stock has changed its trend. By the way, do not forget that a trend change when going down does not necessarily mean to start a bullish trend because a sideways movement can develop.
Besides, the stock seems also unable to close in a weekly close above the 30-week exponential moving average.
In conclusion, for now, we will wait outside this stock no matter how good the fundamental analysts praise it. Actually, in our eyes, now it would be more reasonable to trade a short position than a long one, although we would not do it either because in the very long-term, Diageo PLC is in a bullish trend.
Sometimes, one just needs to stay away.
*Please keep in mind this is just a subjective opinion, and it is not an investment recommendation. Always make your own decisions, and if you need help, ask your financial advisor.