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2 Stocks to Buy to Feast on a Food Stock Rally

Chris Tyler

Food stocks GrubHub (NYSE:GRUB) and Shake Shak (NYSE:SHAK) are serving up tantalizing technical treats on the price charts. But for bullish investors, I suggest reining in the enthusiasm a bit and playing it safe.

2 Stocks to Buy to Feast on the Food Stock Rally

Source: Rik Panganiban via Flickr

Technically speaking, you could say that both GRUB and SHAK stock have something for every type of investor. That sounds agreeable, but investing in these food stocks isn’t that simple …

At the end of the day, everyone realizes there are bulls and bears in the market. However, there’s also value, growth, momentum and income investing. In fact, there’s more than a few variations and cross-contaminated styles to consider … and that’s not just food stocks.

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This goes for the whole enchilada of publicly traded companies out there. And the way I see these two food stocks right now, GRUB stock is being served up as a contrarian, deep-value purchase, while SHAK looks like an All-American classic price pattern worth biting into.

Food Stocks Buy #1: GrubHub (GRUB)

The first of our pair of food stocks to buy is GrubHub. Shares of the food ordering and web-based delivery service platform are not exactly the flavor of the day on Wall Street. But don’t let that dissuade you — GRUB stock is a buy!

With decent sales prospects of nearly 25% projected for the next five years, mid-cap pricing of just $6.15 billion and its recognizable name in this emerging industry trend, GRUB stock is one for contrarians to sink their teeth into.

Technically, shares of this food stock look super tasty on the price chart as well!

Currently, shares of GRUB are just coming off a confirmed variation of a four-month-long double-bottom pattern. With the formation finding support from the 62% retracement level and stochastics readying to cross from an oversold position, this food stock is a buy today.

One caveat with buying GrubHub shares are earnings. The company’s next quarterly confessional is slated for Thursday evening. Gap risk is heightened for a food stock like GRUB, which has a history of volatile post-report reactions and isn’t a tendency to take lightly.

As much, while this strategist believes the odds favor a bullish earnings event, nibbling on a smaller size order of GRUB stock makes sense. Alternatively, I’d recommend investors consider using the options market to gain long delta exposure with absolute, predetermined risk.


Food Stocks Buy #2: Shake Shack (SHAK)

It’s a fact, even the best stocks go through corrective phases. And during SHAK stock’s fairly short time as a publicly traded company, shares have witnessed a couple of larger periods of what some might call unruly price behavior. Still, these periods do act to serve up bullish platforms for higher prices like the correct cup-shaped base forming in this food stock since mid-2018.

But that’s not all this food stock is offering today’s bullish investors.

Currently SHAK stock is putting together an equally classic-looking tight handle consolidation that centered on the 62% retracement level. This is akin to the cherry on top of the sundae and sets this food stock up for a breakout entry:

For investors interested in taking a bite out of this classic bullish pattern, a higher and above-average volume breakout 10 cents above the handle’s high of $60.94 is the ideal entry point. Using a stop-loss of 7% to 8% in SHAK stock also works with buying this kind of setup. As with our other food stocks, earnings are just around the corner on May 2.

Similarly, SHAK stock is also known for its volatile reactions. Once more, you will find guaranteed protection by using the options market.

Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.

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