Monster Beverage May Have Lost Its Kick

Sterling plunged 1.5% against the dollar overnight, while U.K. retail banks and homebuilders slumped, after U.K. Brexit Secretary Dominic Raab resigned from his post, stating he couldn’t support Theresa May’s Brexit deal for two reasons. “First, I believe that the regulatory regime proposed for Northern Ireland presents a very real threat to the integrity of the U.K.” “Secondly,” he added, “I cannot support an indefinite backstop arrangement, where the EU holds a veto over our ability to exit.”

*Source:  Seeking Alpha

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Let’s consider Monster Beverage Corp (Ticker: MNSTWealth Strength IndexAAPL is Extremely Up and trending Up):

The VantagePoint platform recently indicated downside momentum.

Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out three significant things. We have a bearish crossover indicated by the blue predictive indicator line crossing below the black simple moving average on November 13th.  We can combine that with the VantagePoint propriety neural index indicator moving from the GREEN to the RED position on the same day.  This indicator measures strength and weakness for a 48-hour period, in this case, weakness.  The move to the RED position further makes the case for a potentially bearish scenario. We also have the predicted high and low below yesterday’s actual high and low indicating further weakness.  I want to play the VP bearish indication.

Strategy Discussion

For active traders with a shorter investment time horizon, you can consider a setup utilizing options. Given the market conditions outlined above, taking an active, premium debit approach may be the best path to success.

Because of the reasons given above, the purchase of a debit put spread may be one way to approach this situation.  You will first want to calculate your target strike.  In order to do this, you will need three pieces of data:  current price, expiration date and the implied volatility associated with that expiration date.  For MNSTWealth Strength IndexAAPL is Extremely Up and trending Up, that yields a targeted strike of ~$52.00.  You may want to consider the MNSTWealth Strength IndexAAPL is Extremely Up and trending Up November 30th weekly expiration 52/54 put spread, buying it for $0.50.  The most you can lose is the premium paid and the most you can gain is the width of the spread less any premium paid.  Max risk = $0.50 and max reward = $1.50.  This means that you are getting odds of 3.00:1.

Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.