Is A Golden Cross Brewing For Ambev? Technical Charts Show Bullish Potential

Ambev SA ABEV is inching towards a golden cross—a technical signal that could suggest brighter days ahead for the stock.

As one of the largest beverage giants, Ambev has been a key player in Latin America’s beer market, dominating countries like Brazil, Argentina, and the Dominican Republic.

But, after a challenging year with stock price declines and currency woes, could this golden cross be the turning point?

Ambev's Brewing Success In Latin America

Ambev isn't just any beer company. With control over 66% of Brazil’s beer market, a near-monopoly in the Dominican Republic, and substantial stakes in Argentina and Canada, this giant knows how to dominate. The company, a key part of AB InBev, has a knack for using its scale to drive profits, with a strategic focus on premium brands.

This shift towards premium beers, coupled with steady price increases, helped Ambev weather market turbulence.

After a slowdown in 2023, Ambev is rebounding in 2024. Growth picked up in the second quarter, and with stabilizing commodity prices, the company is poised to improve margins by 2027. With an expected expansion of operating margins and continued pricing power, Ambev is looking to shake off the recent slump.

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Golden Cross On Tap: Is ABEV Ready To Shine?

For technical traders, a golden cross is a big deal—it happens when the 50-day moving average crosses above the 200-day moving average, signaling potential bullish momentum. Ambev's stock is close to making this move, and while its recent price action has been bearish, this could shift the tide.

Chart created using Benzinga Pro

Currently trading at $2.25, ABEV stock is still below key moving averages, signaling a bearish signal for cautious traders. ABEV stock's eight-day simple moving average stands at $2.29, while the 50-day SMA is $2.35.

However, with a Relative Strength Index (RSI) of 38.41 and declining, Ambev stock could soon be oversold. This is when we could see some buying pressure starting to emerge. The negative 0.02 of the Moving Average Convergence/Divergence (MACD) indicator also suggests it's time to take a closer look.

Why Ambev’s Valuation Matters Now

Despite the technical picture, Ambev's fundamentals remain strong. Trading at a discount to historical averages, the stock offers upside potential for both price appreciation and income, with a dividend yield of 6.71%. The company's ability to generate strong cash flows and impressive balance sheet, including a net cash position of 10.7 billion reals (approx. $1.88 billion), make it an attractive option for long-term investors.

With third-quarter earnings approaching, now could be the time to watch Ambev stock closely. A positive earnings surprise might be the catalyst to push the stock through the golden cross threshold and into bullish territory.

Ambev's golden cross is almost here, and for savvy traders, this could mark a buying opportunity.

While the stock has been down in 2024, its dominance in Latin America, coupled with a strong balance sheet and recovering margins, positions it well for a turnaround.

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