Monster Beverage Guzzles an Energy Shot

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Shares of energy drink company Monster Beverage (MNST) made a technically significant move higher Wednesday that could now lead MNST stock to begin its next up-leg.

beat the bell stock picking adviceAnd investors can hop along for the ride.

In early August, Monster Beverage reported second-quarter results that analysts were mixed on, though growth certainly was there — earnings per share were up 30% year-over-year on sales that improved by 9%.

Then, just five days later, Coca-Cola Co. (KO) and Monster Beverage announced a long-term strategic partnership. Coke bought a 16.7% equity stake in Monster Beverage for $2.15 billion. In return, MNST said Coca-Cola would become its preferred global distributor.

The news understandably blasted the stock higher the following day in a major breakout move. Analysts were quick to revise their targets upward, and on Aug. 19, Goldman Sachs raised its price target on MNST stock from a previous $87 up to $125, maintaining its “buy” rating.

MNST Stock Charts

Looking at the multiyear weekly chart, MNST stock has acted well and respected its various technical support/resistance levels nicely.

In February, Monster Beverage made a marginally lower high vs. its previous all-time highs from 2012, and the stock then settled into a consolidation phase. After holding the support line (lower black line), the August rally quickly and powerfully pushed the stock past the upper diagonal resistance line. If we sync the news that caused MNST’s move — Coca-Cola taking a healthy stake in Monster Beverage — it only makes sense that the breakout stands a good chance of sticking.

In recent weeks, MNST stock has consolidated the August rally in a healthy manner, and with Wednesday’s rally now looks to be breaking the stock higher again.

MNST stock chart weekly
Click to Enlarge

On the daily chart below, I added a pair of my near-term overbought/oversold gauges: the eight- and 21-day simple moving averages (blue and yellow lines, respectively). Note how far removed price got from those two moving averages upon the breakout rally. In the meantime, both moving averages have just about caught up with price, and the eight-day is holding as nice and firm support.

On Wednesday, MNST stock improved by 2.14%, and by so doing broke out of the wedge formation that had been building since the Aug. 15 spike.

MNST stock chart daily
Click to Enlarge

Active investors could now use Wednesday’s breakout to hop on board for a move toward $96, followed by $100. For risk management purposes (because that’s what this business is all about), note that any quick bearish reversal of Wednesday’s breakout move would nullify the setup until further notice.

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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2014/09/monster-beverage-mnst-stock/.

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