In a heated market Beyond Meat (NASDAQ:BYND) is notorious for sizzling gains, as well as its ability to get “grilled” at any moment. Right now, the BYND stock price chart suggests the dinner bell is ringing for bears. But that’s not to say bulls can’t pull off an outsized win. Let me explain.
Those that followed the age-old advice to sell equities in May likely didn’t get the results they wanted. The broader market — led by the S&P 500 — finished up 4.8%. The gains also put the index at a three-month high.
Now, the bellwether index is roughly 39% above its late-March correction. Its move higher was helped by solid leadership from household heavyweights Apple (NASDAQ:AAPL), Home Depot (NYSE:HD) and others. Yet, in today’s environment, investors also have an insatiable appetite for BYND stock.
Hungry Investors Drive BYND Stock Higher
Shares of the faux meat upstart finished higher by nearly 30% in May. Street-beating quarterly results are largely responsible for the outsized gains, and a spike in consumer interest also didn’t hurt. The novel coronavirus took a big swipe at the meat industry, so fake meat became more appealing.
By the end of the month, BYND stock hit a total return of 150% since bottoming in March. Plus, shares closed higher by 8% Monday, getting June off to a great start.
Shares of Beyond Meat were up following news that Yum China Holdings (NYSE:YUMC) is testing the company’s plant-based burgers at its chains in China beginning this week. Following its recent partnership with Starbucks (NASDAQ:SBUX) overseas, a successful campaign in select KFC, Pizza Hut and Taco Bell restaurants could result in an even bigger win for Beyond Meat as it looks to expand Asian markets.
Still, there’s reason for caution amid the cheer. Remember, the market is made up of stocks. Given Beyond Meat’s volatile rally over the past couple of months, bulls should be mindful of bears choosing to enter the picture here.
Beyond Meat’s Weekly Stock Chart
For full transparency, I love my Beyond Meat beef, sausage and chicken-inspired food offerings. As an investor, I am long BYND stock as a core portfolio holding. But, I don’t believe in being a pig caught feeding mindlessly at the trough — and that risk is present right now.
Technically, the above weekly chart of Beyond Meat shows the past several months of price action have developed into a broadening pattern or inverted triangle. The volatile formation is formed over a series of five price pivots. Shares have just completed the fourth pivot as part of the aforementioned gains of 150%. Now, the pattern implications are bearish in the near term.
The fifth and final pivot low, if fulfilled, would produce a materially painful period of lower prices for Beyond Meat shares, including a new all-time-low. Then, you have the coupling of an overbought stochastics crossover and last week’s candlestick topping confirmation against the stock’s 50% retracement level.
To ignore those warning signs would be foolhardy. But, that’s not to say investors bullish on Beyond Meat should exit now.
The Bottom Line
Nothing on the price charts is ever written in stone. Price formations are fluid and sometimes a top is only a top until it’s not. Patterns fail all the time, and on occasion, that change of character can happen quickly. And for a contentious name like Beyond Meat — which sports a decent short interest of nearly 12% — the chance for decidedly more bullish price action is always a possibility.
Bottom line, I’m unsure what’s going to happen next in Beyond Meat shares. However, I do respect the increased chance for challenging price action that is upon shareholders right now. Moreover, with a dynamically hedged collar, this long-term stock holding is in a much stronger position to make hay over time with unmatched risk-adjusted returns. Isn’t that some food for thought?
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.