Calls In Demand as Monster Beverage Tests Chart Support

Monster Beverage's recent post-earnings performances have been poor

Aug 7, 2018 at 3:20 PM
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Monster Beverage Corp (NASDAQ:MNST) has sold off in the session immediately after the company's last two quarterly reports, falling 7.5% in May and 14.4% in March. The company is set to release earnings after the close tomorrow, Aug. 8 -- but this time expectations seem to be that the stock will gain following the quarterly update, at least going by recent options data.

Specifically, Trade-Alert highlighted heavy volume at the weekly 8/10 60.50-strike call in yesterday's trading, where what appeared to be buy-to-open activity took place. This would mean speculators expect Monster Beverage shares -- currently trading at $59.50 -- to rally above $60.50 by the close on Friday, when the contracts expire.

Overall, the equity has a 10-day call/put volume ratio of 6.16 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks in the 84th annual percentile, confirming a very unusual call bias in recent sessions. Taking a broader view, the September 60 call is home to peak open interest, where data points to heavy buy-to-open activity.

On the charts, MNST recently topped out near the $62 level, site of its January and February lows, only to find familiar support near the $58 region, which marked its post-bear gap highs in March.

The stock is also testing its 40-day moving average, and that has bullish implications. Data from Schaeffer's Senior Quantitative Analyst Rocky White shows that the last eight pullbacks to this trendline after a lengthy stretch above it has resulted in an average one-month gain of 3.1%, with 75% of the returns positive.

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