Shake Shack (SHAK) is the poster child for momentum stocks. Its volatility is out of this world, and profits aplenty have been delivered to both bulls and bears since the popular restaurant chain went public in January.
After reaching for the stars in the first few months of its life as public company — almost tagging the coveted century mark — Shake Shack stock has tumbled all the way back to its IPO price near $45. If recent action is any indication, however, things may be about to get exciting again.
Over the past week, two strong bullish days have emerged with heavy volume to boot. The pair of accumulation days could be signaling another rally attempt is brewing.
Shake Shack stock is nestled just beneath its 50-day moving average and is consolidating in bullish fashion. While it’s falling amid today’s stock swoon, a breakout play could be in the offing early next week. SHAK enthusiasts who’ve been waiting for signs of strength to return should be perking up here.
Unfortunately, while SHAK is beginning to mature as a stock, its options are still in their infancy. The lack of volume and wide bid-ask spreads is making it darn near impossible to structure an options trade with confidence that we’ll be able to exit quickly should the need arise. So let’s steer clear of SHAK derivatives until more liquidity arrives.
The Shake Shack Stock Trade
For this breakout play we’re going with a straight up stock trade. The beauty of Shake Shack’s recent developments is that it has created a clean entry point over resistance.
Buy Shake Shack stock over $56 if it can break out and root for another upside volatility surge. If the stock gains traction, it could return to its previous major ceiling at $75. If the breakout bid fails I suggest bailing if Shake Shack stock takes out $48.50 to minimize the loss.
At the time of this writing Tyler Craig had no positions on any of the aforementioned securities.
