The Short-Term Picture Looks Cloudy for Monster Beverage Corporation (MNST)

Monster Beverage Corporation (NASDAQ:MNST) could be in store for another weak post-inauguration performance

Jan 20, 2017 at 2:45 PM
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Stocks are currently trading higher, after Donald Trump was sworn in as the 45th president of the U.S. earlier. According to Schaeffer's Senior Quantitative Analyst Rocky White, the S&P 500 Index's (SPX) positive price action could continue over the next six months, considering the broad-market "Trump rally" that inspired after the early November election. Looking ahead to next week's action, White broke down a list of how individual S&P stocks have historically performed in the week immediately following the presidential inauguration, going back to 2000. While these two oil stocks have tended to do well, drink maker Monster Beverage Corporation (NASDAQ:MNST) -- as well as this casino stock -- has been among the worst post-inauguration performers.

Worst Inauguration stocks Jan 20

As you can see, MNST shares have moved lower in the week after Inauguration Day all four times since 2000, with an average loss of 1.9%. At last check, the stock was trading at $43.33, as the descending 50-day moving average -- a former layer of support that switched roles back in August -- continues to apply pressure. Moreover, the stock has been trending lower since its record Aug. 5 high above $55, and is now lower on a year-over-year basis. 

Extended losses could draw bearish attention from the brokerage crowd. At the moment, five analysts recommend buying MNST, while none rate the stock a "sell." What's more, the shares continue to fall further from their average 12-month price target of $53.80. As such, the underperforming stock is vulnerable to downgrades and/or price-target reductions, which could create headwinds.

On top of this, short-term options traders are unusually call-skewed, which could also pressure the shares as these positions unwind. For instance, MNST sports a Schaeffer's put/call open interest ratio (SOIR) of 0.51, meaning call open interest roughly doubles put open interest among options expiring within three months. Plus, this SOIR is just 4 percentage points from a 12-month low, meaning such a call-skew is very rare.

It's also discouraging that the stock has continued to underperform despite the fact short interest has been declining. Compared to where it was in mid-June, short interest on MNST has fallen by 67%. Not only does this point to underlying technical weakness in Monster Beverage Corporation (NASDAQ:MNST), but it suggests there's potential for these bears to target the stock once again and apply even more pressure. 

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