MNST Swing Trade on Cup and Handle

MNST Technical Analysis

We’re going to play the cup and handle pattern that MNST has formed over the past 6 weeks and get long for the breakout.

Update

Trade Entered

Thesis

MNST has formed a great looking cup and handle and we’re facing two catalysts. The first is obviously earnings, but the second is the convergence of the lower channel trendline and the overhead resistance of created by the last run. It will break out on volume within the next two weeks. The thesis is broke if it drifts through the lower trend line, a seemingly low risk possibility.

MNST Entry Target

We’re going to enter this trade tomorrow, Wednesday 10/25/17. Watch the daily price action and look for a good entry point. As part of our entry parameters we’re going to suggest also watching the indexes to make sure they’re not plummeting before entering this trade. I do see this as a potential risk. If you’re trading shares get long and set a stop loss just under the lower trend line, something like $55.80.

MNST Option Play

Typically I try to buy ATM but we’re going to look a little bit outside the money on this one. We’ll be selling before ER (unless you’re feeling bullish), but the implied volatility from the impending ER event should be enough to keep these options from going worthless. That is however, not to say they are not at risk of being worth very little. I do see ER as a second chance should they fall too close to worthless. We’re going to get long on the 3 NOV 58C.

MNST Target Price

Ideally we are looking for $59.80 which is the depth of the cup. However, we’re going to exit before earnings to either recoup capital or lock in profit before the threat of earnings risk. Monster Beverage Co’s earnings are to be held on Thursday, November 2nd after market. Share trading should have a stop loss set at $55.80 and move up incrementally with the trend line. The exit for the suggested options contract is going to be similar, but if I’m wrong about the movement in IV and the option contracts are not worth much they might as well be held through earnings due to risk reward situation. I am bullish, but if there’s profit to be locked in it should be taken prior to earnings.

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