If there's one thing that can slaughter the bull, it's supply, Jim Cramer warned his Mad Money viewers Tuesday night. The stock market operates on simple supply and demand, Cramer explained, and while it's sometimes hard to see, a wave of new shares is upon us.
Cramer's prediction about Beyond Meat (BYND) came true on Tuesday, as the company reported strong earnings, but still saw shares plunge 22% as the lockup on insider selling expired. Cramer said he remains a fan of Beyond Meat, the company, but its shares simply aren't worth $5 billion, even after Tuesday's plunge, especially given the coming competition.
We looked at BYND last week and noted that "hope is not an investment strategy and I would not hope that BYND has seen the end of its decline. Continue to avoid the long side of BYND but do consider adding more plant based meals to your diet." Our Point and Figure price target of $95 has been exceeded.
In this daily bar chart of BYND, below, we can see a parabolic-like decline this month. Prices are below the declining 20-day and the declining 50-day moving averages.
The daily On-Balance-Volume (OBV) line has been telling us that sellers of BYND have been more aggressive and trading volume surged this week as trading losses and additional supply hit home.
The 12-day price momentum study in the lower panel is not showing us that the pace of the decline has slowed which is a precondition for a low or bottom to form
In this Point and Figure chart of BYND, below, we can see the wide range that prices have moved in the past six months. A new downside price target of $57 is being projected.
Bottom line strategy: Prices and traders fighting the tape have been roughed up pretty good by October's decline. Prices could bounce but that is not good enough to make a good low or a decent bottom. Further weakness is possible and buyers with strong hands are needed to start building a long position. Meanwhile keep your powder dry.