From 2011 through the first half of 2012, energy drinks distributor Monster Beverage Corporation (NASDAQ:MNST) was a trend follower’s dream stock. Pull-backs to simple support areas were shallow and subsequent buying came back steadily. Many a fund could have made its year by just following the stock higher.
Click to Enlarge The larger picture up-swing, almost 650%, which started in late 2008 and lasted until June 2012, eventually however retraced roughly 50% by November 2012. From there, after a couple of months of basing, the stock has slowly been working higher in a choppy fashion until just recently moving into an important resistance zone again.
The 2012 October/November double bottom in the stock was textbook and one that has since been confirmed with a solid higher low, which developed over the course of the first three months of 2013. In early April the stock started breaking out of this three month sideways trading channel and by April 12th had again reached Its December 2012 high near $57.
Click to Enlarge Over the past ten trading sessions or so, Monster consolidated the early April rally. This churning just below the upper end of the $2 wide resistance zone which spans from $57 to $59, looks bullish for a trade.
The early April rally also pushed the stock back above its 200 day simple moving average for the first time since August 2012, and the longer the stock bases above there, the better its chances should be to move higher still.
On a daily breakout past the $59 resistance zone, MNST should quickly be able to move toward $62 – $64, which would represent roughly a 5% – 8% move. Given the rather volatile nature of the stock, traders would be served by keeping both their stops and profit targets well defined.