HANS Pops 50% – Short Squeeze?

Aug 15, 2008: 1:19 PM CST

In one of the most massive short-squeezes/bottom fishing price surges I’ve seen, Hansen Naturals (HANS) – famous for their energy drinks – surged 50% from new 2008 lows, which was preceded by a distinct positive momentum divergence.  Let’s look closer.

HANS Daily:

According to the Motley Fool article, Hansen released news that their Monster Energy drink (16oz) just overtook RedBull (8oz) to become the current market leader in US energy drink sales.  Such news, combined with oversold technicals and – I would guess – a relatively large short float gave the stock all the energy it needed to boost higher and form a new upswing in price.

Let’s keep in mind that the trend is still clearly and confirmed down, and even a 50% rally does not change that fact.  We’ll still need price to retrace part of this move and form a higher low before switching trend.  Also, note that the moving averages are currently in ‘the most bearish orientation possible,’ which does not bode well for the stock. On a bullish note, price is above the 20 and 50 day EMAs.

Notice in mid-June when a similar ‘price pop’ happened that took price above these averages yet bulls failed to consolidate the gains, and the selling pressure continued to press the stock to new 2008 lows, forming two additional swing lows prior to our current surge.

If by chance you may be looking to get long HANS, try to wait for a pullback, instead of getting euphoric and joining after such a large volatility price swing.  Also, let’s take a peek at the higher timeframe structure to see if it adds any clues.

HANS Weekly:

Sure enough, price is currently testing (and perhaps failing) at the 20 week EMA, which is a level that has not been breached (on a closing basis) since the horrific plunge in late 2007.  Notice how the 20 week EMA has contained all price rallies until present.  In fact, any retracement to this average served as an excellent, low-risk shorting opportunity.

This stock teaches us valuable lessons about divergences, trends, moving averages, gaps (from the daily chart), earnings, etc.  Continue to study it for your own insight on trading opportunities and risk management.

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