This stock had been a monster, but that all could change quickly here. After a monster gap up in March, MNST has done little. For quite a while, it looked like the bulls were merely consolidating. Bollinger bands tightened and then the stock pushed higher toward the end of April, but now we have a problem.
A gap down in May has left us with a very bearish taste in our mouths. An island top of sorts is now left on the chart, and we still have a gap left to fill in both directions. Unfortunately for the bulls, the gap lower to $125 looks like it will be filled in the next few days, with $122 possible.
This looks like it has the potential to be a much bigger move to the downside. I wouldn't write off the potential for a revisit of the $115 level here. We are consolidating price in the style of a bear flag with confirmation from the RSI and slow stochastics. Momentum and trend are bearish and getting more so. Price acceleration to the downside is absolutely possible here. Until MNST pushes back over $134, I have no interest in being long. For those looking to play the long side, buying here with a target of $132 and a very tight stop is the game. I have no interest in that one.
The support around $122 is a bit clearer on the weekly chart. I don't really see it on the daily chart. Price has pulled back to test the midpoint of the Bollinger bands here, but in the past that hasn't been a support level. In fact, it has only been a brief pause before eventually pushing to the lower Bollinger band, which is around $111.50 for Monster.
This echoes the risk in the daily chart on downside acceleration. At least the longer 13 period RSI is still over 50, but everything else has broken down. The trend looks like it has changed here and momentum is about to follow suit. Longer-term price action doesn't look bullish here until MNST is bid over $140 to $145.
As KBG from the movie Rounders might quip, "Lays down a monster." If you're a bull, that's exactly what I think you have to do here.
Editor's Note: This article was originally published at 12:30 p.m. EDT on Real Money on May 20.