Fizzy Drink Maker Delivers Bubbly Earnings, Stock Goes Flat (CELH)

Today’s profit-quenching trade is a play on all those fancy gym beverages, and offers an exciting maximum haul of exactly 3233%.

So without further ado, let’s look at Celsius Holdings (NASDAQ:CELH), maker of ‘functional drinks’ and ‘liquid supplements’ – can nothing these days save us from the pretentiousness…?

Sugar Water

To be more precise.

Anyway, CELH stock jumped better than 100% in just over a month, and that caught our attention.

And it wasn’t because they sold a whole lot more cans of their illustriously named Orangesicle

drink.

It was because of…

Nothing.

That is, the stock delivered better than expected earnings on August 10^th, but the gains had already been logged by then.

Fundamentally, the stock today is no more than a big, sticky puddle –

• P/E is 518.75 (what the…?),
• There’s no Dividend,
• Stock trades at 31x its break-up value (P/B is 31.32), and
• Earnings this year fell by 55.70%.
• But yes, we did see one better than expected quarter.
• Also noteworthy: insiders have been cashing in their chips big, with $48 million sold in just the last six months – OF WHICH a robust $44 million was offloaded in just the last 30 days.

Heh, heh, heh… and they thought we were napping.

Now look at the chart –

This is a year of CELH, and technically it offers the following –

1. RSI touched the overbought 80 line two weeks back and has been in free-fall ever since.  If it goes sub-waterline in the next two or three days, we should see a pick-up in selling (in green).
2. MACD, too, has rolled lower, another indication of changing momentum.
3. Both of the foregoing occurred as price banged up against overhead resistance at 110 (in black), creating a double top that could also be a harbinger of an intermediate term reversal.
4. A steep, nine-week trendline (in red) has also been broken – though only marginally – and that, too, could portend further weakness in the days ahead.
5. When and if the crack becomes more pronounced, there’s a gap that needs filling to 89, which also aligns with the rising short-term MA.  And that’s our projected first stop lower.
6. Thereafter, there’s no support until the bunched moving averages at 70 (in purple).
7. Volume figures are representative of the above-mentioned increased insider selling (boxed, in black) and add both reason and motivation for the bears to get testy.

To sum, we don’t need so great a pullback to cash in like real Wall Street criminals today.

Just this –

A Jew and His Gold recommends you consider selling the CELH October 21^st 95/100 CALL spread* for a credit of $2.10 (13.30/11.20) and buying the CELH October 21^st 90/85 PUT spread** for the same $2.10 (7.80/5.70).  Zero premium is the result.

[*Sell the 95 CALL and buy the 100 CALL.  **Buy the 90 PUT and sell the 85 PUT.]

Rationale: for no money down, we earn the potential of a $5.00 profit.  Adjusted for minimal commissions, that offers us a 3233% win.

Max loss, too, is $5.00 (difference between the CALL strikes).

Time frame is ample.

Market short-squeeze is running out of steam.

Look for a turnaround on this one by Labor Day.

The Good Lord willing.

Many happy returns!

Matt McAbby

Follow @HughLOHaynew