Market Leadership’s Odd Couple: Wingstop and Regeneron

WING - Market Leadership’s Odd Couple: Wingstop and Regeneron

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What do Wingstop (NASDAQ:WING) and Regeneron (NASDAQ:REGN) have in common? Many investors might be inclined to think “not that much.” But if you’re an investor who is now rightfully bullish on the market, the correct answer is “more than you think.” Let me explain.

A small-cap restaurant chain dedicated to making sure customers get their fill of delicious wings and one of biotech’s larger players — what could possibly connect Wingstop to Regeneron? The answer is plain and simple — growth and overall solid fundamentals, as well as very similar and historically supportive price charts in WING stock and shares of REGN.

Some might ask further questions: “What about China, the Federal Reserve, a looming recession and late December’s official welcoming of the broader averages into a bear market?” My answer is, go ahead and worry. But if you want to make smart investments after a strong correction, a welcoming over-the-top spike in market volatility to historically extreme levels and last Friday’s strong, time-tested “follow-through day” rebuttal; it’s time to put WING and REGN stock on the radar.

Pairs Stock Strategy Long: WING Stock

Wingstop is a relative newcomer to the market. Shares of WING IPO’ed back in mid-2015, but don’t let youth as a publicly traded company stop you from buying the restaurant operator. Bottom line, this relative newbie to the market has been growing solidly.

Another support is the fact that stocks like WING most often make their biggest gains while they’re younger and the law of large numbers isn’t yet such a burden. As such, there’s little reason to think WING stock can’t become a good deal bigger from today’s current $2 billion capitalization as the company spreads its wings (no pun intended).

Source: Charts by TradingView

On the price chart of WING stock, shares look equally tasty. A technically constructive “W,” or high-level double-bottom corrective base, has formed over the last few months on the heels of a solid uptrend to all-time highs over the course of a year or so.

As corrections happen to even the most favored stocks, the recent price action in Wingstop of late could be labeled as being inevitable and not something to be feared. Even better, as the technical pause has consolidated gains in a healthy manner during the broader market’s less-seemly correction; the W base in WING stock also represents solid-looking leadership as the averages attempt to re-establish a bull market.

For bullish investors interested in nibbling on WING stock, shares are in position today to be purchased as they’ve already cleared the pattern’s mid-pivot of $66.41 from early December. Waiting for a breakout to fresh all-time-highs is an option too. Either way, using an 8% stop-loss looks about right as to ensure Wingstop investors don’t get fried.

Pairs Stock Strategy Long No. 2: REGN Stock

Regarding the big picture of the last few years, its true shares of Regeneron look a bit different than WING stock on the price chart. It’s more than a bit obvious REGN isn’t sporting anything remotely like Wingstop’s sturdy-looking uptrend of the past couple years. However, both names do share the same bullish W, or double-bottom basing pattern.

Source: Charts by TradingView

In this instance, Regeneron’s chart formation has developed as a corrective variation following a small uptrend off REGN’s move to four-year lows. It’s our contention that the combination, along with REGN’s strong fundamentals, are setting the stage for an emerging and powerful bullish trend in 2019 for this biotech giant.

I’ll be frank — REGN stock can be treacherous. Despite its size and market reach, Regeneron has shown a knack for being volatile. Sometimes this quality is supportive for investors. But it can be equally challenging due to price gaps, as well as sharp and fast moves in shares.

For investors still interested in going long Regeneron, like Wingstop, shares are in position to be purchased just pennies above the early December pattern mid-point of $396.32. I’d use still use an 8% stop here, as it amounts to a four-day low and would all but negate the breakout of the base’s mid-pivot entry.

Alternatively and for more risk-averse bulls, buying the May $420/$440 bull call spread looks like a way to enjoy strong profits if a new leg up begins while minimizing and containing exposure in REGN stock to a known amount of risk. 

Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.

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