Are you trading this monster? (July 31, 2012)
MNST
I’m Dan Fitzpatrick at StockMarketMentor.com on Tuesday, July 31st. Today I want to look at Monster ( $MNST Monster Beverage Corp ). This company, and this is important, it’s actually the basis for the video, this company announces earnings on Monday; you’ve got to keep that in mind. I’ve been talking about this stock for a while, I look at the fundamentals, the growth, prior growth history, everything about it looks just massively awesome if that’s a term, it is now. It looks great, the stock of course has been a really nice performer over the last few years so you’ve got to wonder; is all of that greatness already baked into the price of the stock? It was in a nice uptrend, we got this shot across the bow here which is my term for stock that penetrates a key moving average that has been holding up for quite awhile and it penetrates it on big volume; and that’s pretty much what this did here. Rallies up and it prints a lower high, relative to this, and then starts rolling over again; that makes this a big oops stay away stock, for me. So I did have this on my you know, Fitzpatrick buy list so to speak, but then it quickly went from up, now it’s not working, I want to get out until finally when we had this reversal and members you know what I’m talking about I’m probably boring you because I’ve been talking about this for a while; we have this reversal and I noted that I was looking for a short setup, now I haven’t really turned bearish on the company’s fundamentals because I don’t know that much about the fundamentals, I know they’re good, I know the peg ratio is quite favorable, high P/E, but so is the growth. So that’s fine but I just know that this is a lot of resistance, a lot of supply right up there and so my take was after this break down, below there, even below there, we got the breakdown, this to me looks like a stock that’s in search of lower highs which so far is what it’s doing so my suggested trade, my trade that I was talking about, was wait for the stock to come up to this prior support level, which would now be resistance and then look to short the stock anticipating that kind of move, but you would keep a buy stop on it; in another words if the stock moves above into the green box you want to cover your short. So what we’ve seen now, we started to see this, I mentioned it last week, that when the close started getting lower than the open like we saw on Friday and then yesterday, that’s telling you that there’s some selling into the end of the day so sell orders are being cleaned up towards the end of the day and that’s pushing the stock down. Well today we finally got additional selling and really confirmation that there’s excess supply here. So what do you do? A couple days ago was the best time to be short this stock but frankly I think you can short it today or I should say tomorrow, I’m doing this on Tuesday night, I think you can short it on Wednesday as long as you understand that they announce earnings on Monday and I actually don’t know if it’s before or after the open so you’ll have to check that out before the market opens or after the close on Monday but I think you’ve got three days to ride this short down before you cover it. Then what do we do with the stock after they announce earnings? Why don’t we wait for earnings and then I’ll tell you about that too? This is just my take on it but I’ll close with this; I think the fundamentals of the company are great, I can’t pick a bone with those at all, that’s not my deal, but technically it sure looks to me like the stock has peaked and is now under some distribution. Okay members, go to the Strategy Session it’s surprisingly robust tonight. Free Chart