Todays Big Stock: Hansen Natural Corporation (NasdaqGS: HANS)

Are you bearish? Looking for upcoming bearish opportunities?  One such stock that may be setting up for a very good bearish trade would be that of Hansen Natural Corporation.

Hansen Natural Corporation is a holding company. Hansen develops, markets, sells and distributes alternative beverages. The company’s category beverages brand names include Monster Energy, Java Monster, Monster Energy Extra Strength Nitrous Technology, Monster Rehab, Peace Tea, Hansen’s, Hansen’s Natural Sodas, Junior Juice, Blue Sky, X-Presso Monster, Vidration, Worx Energy, Admiral, Lost Energy, Hubert’s, Rumba, Samba and Tango. It has two segments: Direct Store Delivery, whose principal products consists of primarily energy drinks, and Warehouse, whose principal products consists of juice based and soda beverages.

To review Hansen’s stock, please take a look at the 1-year chart of HANS (Hansen Natural Corporation) below with my added notations:

As you can see from the chart above, an Ending Diagonal is essentially a type of triangle or wedge formation. HANS has formed an up trending resistance line (red) and an up-trending support level (green). These two trend lines combine to form the Ending Diagonal on HANS.

Ending diagonals are similar to Rising Wedges in shape, but rather than forming after a decline, they are usually terminal moves that occur at times when the preceding stock move has gone too far, too fast. The Ending Diagonal formation is usually followed by a sharp decline retracing at least back to the level from which it began ($70 on HANS) and typically much further.

The Tale of the Tape: HANS appears to be forming an Ending Diagonal chart pattern. If the pattern confirms, by breaking support, a short trade could be entered with an expectation of a fall to at least $70. A stop should be place above the breakdown point when/if it occurs.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!
Christian Tharp, CMT