Why Monster Beverage Stock May Be the Perfect Pick for Bulls

Short covering may also keep the wind at MNST's back

by Research Dept.

Published on Jun 4, 2019 at 12:00 PM
Updated on Jun 4, 2019 at 12:00 PM

The shares of Monster Beverage Corp (NASDAQ:MNST) have remained fairly stable amid the recent market volatility, consolidating nicely since an early May bull gap to form a cup and handle formation on the charts. Looking closer, the stock has found support at a 61.8% Fibonacci retracement of its 2018 high and low, suggesting it could be ready to bounce and add to its 26% year-to-date lead.

mnst stock wkend

There’s still a lot of pessimism around the security, however. Starting in the options pits, traders in recent weeks have picked up puts at an unusual rate, with the 50-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) coming in at 1.00, ranking in the top quartile of its annual range. An unwind of bearish traders could help the shares.

Also, short interest is up more than 80% since the start of the year, but has started to roll over after touching multi-year highs. With many short sellers likely staring at losses, this short-covering trend could continue and keep the wind at MNST’s back.

Monster Beverage’s Schaeffer’s Volatility Scorecard (SVS) also stands out, since it comes in at the maximum reading of 100, showing a strong tendency from the stock to make moves bigger than what the options market was expecting.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this MNST commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

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