Are you buying what Wall Street is selling today? If it involves Beyond Meat (NASDAQ:BYND) stock I’d suggest politely declining headline worries and instead work on placing a first order in shares or even a second helping. Let me explain.
Wednesday wasn’t a great day using a straightforward price performance metric in BYND shares. The faux-meat upstart and recent IPO finished the day off by 5.25%. Thursday saw another 3.7% trimmed off the price before after-hours trading gave back 2%
To be sure, a drop of that size could be and most often is considered a large eye-poke for most publicly traded companies. Importantly though, in Beyond Meat stock you could rightfully label the price action a case of mild indigestion.
The fact is BYND stock has been one of the markets standout performers in early 2020. Shares have soared more than 60% in less than three weeks. Earlier this month rival and privately held Impossible Meats announced it was axing its pursuit to get on to McDonald’s (NYSE:MCD) menu. That’s good news as Beyond Meat looks to lock up its own licensing agreement with the fast food behemoth. And in turn, investors sent shares soaring by as much as 80% in six trading sessions.
This week BYND stock saw another supportive flame lit under shares. On Tuesday Beyond Meat jumped 18% after coffee and breakfast-fix giant Starbucks (NASDAQ:SBUX) announced plans to explore plant-based menu options as it strives to become a “resource-positive” company.
In 2020’s more complete context, the combined Wednesday-Thursday 8.3% grilling is mostly insignificant and easily chalked up to simple profit-taking. But if you’re aching to point fingers somewhere else, look no further than Burger King’s largest franchisee Carrols Restaurant Group (NASDAQ:TAST).
On Wednesday the company announced sales of its Impossible Foods-based Whooper are off to 28 per store per day from 32 in its last reporting period. Unsurprisingly, the news stoked concern the fake meat market is dead in its tracks. But is it? At the end of the day, if baby bull markets are raised out of fear and forced to climb walls of worry, BYND stock has a lot going for it off and on the price chart.
Beyond Meat Stock, by the Chart
Source: Charts by TradingView
You could say I’ve been an early advocate of Beyond Meat stock. Not only is the company’s product routinely found in my fridge, but in early January, I also detailed an early-bird buy strategy at $81 in front of BYND’s massive breakout from a key congestion pattern.
The resulting price action has re-established Beyond Meat’s deserved reputation as a volatile momentum stock. It’s not for the faint of heart. But for those investors comfortable with those risks and owning one of the market’s top growth and hotly contested battleground stocks, there are ways to reduce the chances of owning a fatty investment that’s unkind to the portfolio.
One way to enter into Beyond Meat stock is momentum-based and wait for a price move through $138. This entry is a couple percentage points above the recent high. It makes an allowance for price volatility while also clearing the Fibonacci 38% resistance level. I’d use this week’s closing high of $129.18 as an initial stop to guard against possible larger losses.
Bottom line, this is a potentially very fast, money-style trade and taking initial profits near the 50% retracement level at $155 makes sense in relation to the risks taken on the price chart. Moreover, with earnings less than two weeks out, this exposure needs to be actively reassessed. And if you’re like me, that should include using Beyond Meat stock’s options market for more secure, risk-adjusted opportunities.
Disclosure: Investment accounts under Christopher Tyler’s management currently own positions in Beyond Meat (BYND) stock and its derivatives, but no other 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 market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.