It Might Be Time To Play A Little Defense

This will be an interesting week for sure.

First, it's options-expiration week, or as I like to call it, "Opposite George" week, a Seinfeld reference. We tend to see a bit of whipsaw as monthly options expire. Strong stocks with lots of net in-the-money call premium can see weakness, while weaker stocks with net in-the-money put premium can see strength.

Perhaps overshadowing options expiration the next two days, however, are two key inflation reports - August CPI on Tuesday and August PPI on Wednesday. Hot inflation numbers could trigger another selloff, but lower numbers could add more fuel to the recent bullish fire. As I approach the week, it might make some sense to find defensive stocks that have been strong over the past weeks, but not so much last week. Take Constellation Brands (STZ), for example:

Enter Constellation Brands (STZ):

I like the fact that it's pulled back recently, not really participating in last week's advance. Still, it's in a solid uptrend and is part of a bullish distillers & vintners group ($DJUSVN). In particular, note the strong AD line on STZ. That suggests that morning weakness can be bought. On the annotated chart above, I've noted recent price support close to 242.50 and the rising trendline currently intersects close to that level as well. If STZ were to open a little weak, buying it at a couple levels down to 242.50, with a tight closing stop, would seem to make sense.

Happy Trading! Tom Bowley Chief Market Strategist EarningsBeats.com Better Timing. Better Trades.