Stock of the Week (Dutch Bros Inc) Trade Review & Consolidation Pivot Setup
Hey Everyone!
This week I will be highlighting Dutch Bros Inc (Ticker symbol: BROS) as my Stock of the Week. BROS has been showing relative strength recently and advanced over 20% this week as it broke out from a consolidation pivot
This article will analyze the stock through both a fundamental and technical lens and the included video goes through my trades and execution.
As always, your main takeaways from these articles should be about the process. The same setups appear again and again based on supply and demand.
Now let’s get into the analysis of BROS but before we do make sure you are subscribed so you don’t miss any future articles
Routines
To potentially position in a name you have to have it in the universe of stocks you are watching. I keep a watchlist of recent IPOs and note any that have standout Earnings/Sales growth. BROS ranks very highly among recent IPOs so all that was left to push it from the universe list to the focus list was a technical setup.
During the past few weeks BROS has been bucking the overall trend of this correction and was trying to form the right hand side of its first longer term base. This relative strength is shown well by the trend of the relative strength line which was increasing as the overall market was declining. This is what we call over at TraderLion a Relative Strength Phase.
This coupled with the strong setup which we will discuss later on in the article put BROS on my focus list.
The Fundamentals
Dutch Bros is a fast growing coffee chain on the west coast. I haven’t tried it personally but I’ve heard anecdotes about very long lines at different locations.
Here is a screenshot of the MarketSmith chart of BROS
The growth in terms of both Quarterly EPS and Quarterly Sales is extremely strong. The margin’s growth trend is slightly decelerating although still relatively good.
The annual EPS estimates are excellent at 50% but I would like to see this revised upward in the near future.
Since I first covered BROS back during its IPO base the sponsorship has dramatically improved with now 164 funds owning positions and three top tier growth funds taking up positions. This is an impressive development.
The Setup
BROS was forming a higher low setup above the key moving averages and the AVWAP from the lows.
The edges in play were the launch pad forming and the relative strength phase. Notice the declining volume late last week as it pulled back into the 21 ema.
Trade Execution
I walked through the full details of my BROS trade in the following video:
Key Takeaways
BROS is a promising IPO that could be one of the leaders going forward if the market cooperates. However, there are now a lot of eyes on this name so watch for a potential shakeout before any definitive move higher. Stay nimble in the current environment and be ready for anything. I would highly recommend you analyze your own trades like I did with BROS in the video and grade your actions based on if you followed your process.
I hope you enjoyed this! Please share this article on twitter or with a friend if you think it would help them.
Take care!
Richard