There's no denying it's easy and comfortable to step into a stock that's in a well-established uptrend. That's not where the big money is though. To reap the really big rewards, traders have to be willing to buy at the earliest hints of a new bullish move... hints that Monster Beverage Corp. (NASDAQ:MNST), Dunkin Brands Group Inc. (NASDAQ:DNKN), and Mcmoran Exploration Co. (NYSE:MMR) have all dropped recently after a relatively miserable recent past. Here's a closer look.
There's no two ways of saying it - Dunkin Brands Group Inc. just got overheated over the course of the first half of 2012. The stock rallied from $24 to a peak of $37.02 in just a few months (a 54% romp), and ended up paying the price for it between June and September - DNKN fell back to a low of $27.93 by the end of August. Since that point, however, we've seen a couple of higher lows, and we've watched the stock rock its way back above all the key moving average lines as of today. There's one last hurdle - the falling resistance line (orange) at $31.75. If Dunkin Brands Group shares can get over that level, we could see some bullish slingshot-like action after several weeks' worth of consolidation.
Yes, DNKN is the company that owns and operates Dunkin Donuts stores. And yes, it's as much at war with Starbucks as it is McDonald's as it is grocery stores. But, it actually has an edge on all those other players that are sort-of in the same business. Although Dunkin Brands Group shares still leave something to be desired in terms of valuation (the forward-looking P/E is a frothy 20.9), this chart is suggesting the market's looking for a reason - any reason - to be bullish.
If you're reading this, then you likely already know that Mcmoran Exploration Co. shares got crushed yesterday, and are getting hit hard again today. All told, MMR has lost 31% of its value in just the past two days following news that one of its most promising prospects still wasn't panning out as hoped. Specifically, the so-called Davy Jones well was flow-tested earlier in November, and the results of the test were inconclusive. Unfortunately for Mcmoran shareholders, in the oil business, that tends to be a sign of bad news. If the well can't be tapped, some analysts are considering the company to be worthless; MMR is almost entirely a one-well (one prospective well) organization.
Yet, knowing the market's willingness to over-react, speculators may appreciate the way MMR has snapped back today. Specifically, traders may want to acknowledge the fact that the stock's made a tall doji bar [a doji just means the open and close are nearly identical] on huge volume... a combination of reversal/pivot clues. Traders may not want to get married to it, but it does look like Mcmoran Exploration Co. is good for a quick bounce here.
Last but not least, Monster Beverage Corp. shares are up a solid 11% today on... well, not much, actually, other than a positive review posted at Seeking Alpha. Were Seeking Alpha not the Wild West of the financial world, that might actually mean something for MNST. But, things being what they are, that's a tough move to have much faith in.
Traders may recall MNST is the stock that got crushed in mid-October (falling from $53.32 to $41.08 in just two days) after one of its caffeine-charged energy drinks was implicated as the reason for a teen girl's death late last year. The matter is even being probed by the government... a problem for the stock in itself. Yet, there it is - Monster Beverage shares are flying high.
The bulk of the time, traders are better served by doing what the market is doing rather than what the market is saying. And what the market is doing while it's telling scary stories about Monster Beverage Corp. is actually buying MNST shares... and money speaks louder than words. Odds are, this probe of the company is going to come up with nothing game-changing, and the stock's going to bounce back to more typical valuations. Today's jump is just the jockeying of the traders looking to get out in front of that. It sure doesn't hurt that the stock was already tremendously oversold before working on this month's long-term reversal effort.