Riding the Green Monster

Gator's Chart of the Day: MNST

This stock is Dan Fitzpatrick's free chart so you may want to see what the pro has to say about it.  You can view it here.  http://www.stockmarketmentor.com/public/3984.cfm  It's 3:10 at regular speed or 1:54 on the faster play back.

After selling off hard for three days on heavy volume the stock found buyers Tuesday.  Actually they stepped in Monday and we'll take a look at a 5 minute chart to see where and with what kind of conviction that buying began.



MNST 5 Minute Chart 

On Monday MNST bottomed just before 3PM at 52.00 and moved higher on increasing volume into the close.  It finished at 53.27 and gapped up on Tuesday morning and continued to move higher all day until it closed with the tallest volume bars of the day at a price of 58.59.  Clearly this is not just retail investors but institutional buyers.

Monster is not a value stock.  It has a trailing P/E of 32 and forward P/E of 23 with a PEG ratio of 2.18 but the balance sheet is pristine with no debt.  Finviz shows a target price of 75.57 with less than 1 day to cover the short interest (1.27% of the float.)

The Trade
Buy it while it's hot and sell it when it's not.  If the buyers are still coming I would start the position early in the day and add if the price is still rising after 15- 20 minutes.  If the stock does not open up (or is not green in the first 5 minutes) there is no long trade here.  The stop on the initial position should go just under the low of the day.  (The thesis is the stock is still moving up with momentum and when it stops and reverses that's when the long side of the trade is over.)  The first logical resistance point would be the 200 day sma (59.50) and if the stock moves through there it should pause around 61.  (That's the bottom of Friday's red candle.)  I would be looking to lighten up around that level with a tight trailing stop on at least half the position and I would be looking for the stock to fail before it hit 63.  When it does stop going up I would sell the rest of the position and be ready to short (or buy puts) and take a ride back down. 

If the stock is not green after the opening rotation (about 20 minutes) it could be a good short right then and there.  Once the short postition is established I would keep the buy stop within 1 or 2 points and adjust it as needed.