Diageo PLC is a buy at $189, set to test $220 before setting a new high

Diageo PLC (LON:DGE) is a stock to watch. The alcoholic beverages company is one of a few companies that would be able to withstand economic downturns. That is so because Diageo would still attract consumption despite high inflation and economic downturn.

For the company, the economic challenges only mean that consumers would shift to lower-priced brands. This would necessitate strategy decisions on quantities of various alcohol brands that will be put on the market.

The war in Russia means that Diageo pauses exports to the Russian market. The risk for Diageo is low, especially because the company was already expanding operations in the United States, where a new canning plant is coming up. In Canada, the company is building a distillery. The investments by Diageo should point to the market that the company is highly resilient.

Diageo was rallying after hitting RSI 30 last week

The share price closed lower in the last two weeks. It may have hit a low at $175 considering that it is up again this week, and it is showing signs of a sustainable upward trend. Diageo turned up from the oversold indicator of RSI 30 at the end of last week.

This week, the RSI moves to converge with SMA 14. MACD analysis indicates that divergence from the signal is declining to signal the early beginnings of a bullish trend. Though the MACD is below the oscillator at -1.75, it shows a change in direction to a bullish pattern. The signal at 1.78 is still bullish. The analysis, therefore, sends buy signals to the market.

Summary

We think that Diageo will remain bullish from the current price of $189. It will also test the resistance level of $220 to find a new high. Diageo remains fundamentally strong with continued investments in North America.