It is not often that the newspapers offer what appears to be a slam dunk story regarding a stock or a market, or in fact, anything else. However, The Telegraph’s Hedge Funds Take A £1.5bn Bet Against Premier Inn Owner Whitbread does seem to fit the bill at first glance. After all, who would want to bet against a “Flash Boys” hedge fund, as well as RBC and Short Capital warning against the share price falling below the £50 share buyback level. When you add in Elliott reducing its stake to below 5%, and it would appear only a masochist would remain long, and only a coward would not go short.
Perhaps the most interesting point here is the way that The Telegraph has published such a punchy story, and one that is all stacked up for traders – maybe too stacked up? The other point to note is the way that until Saturday’s article Whitbread shares appeared ultra strong, as has its fundamental history for much of the past few years. This culminated in the group flogging Costa Coffee to Coca Cola for £3.9bn – arguably ahead of the Peak Coffee we have hit in 2019. For instance, it appears Starbucks is dying on the vine in parts of the UK.
Therefore, as is sometimes the case it may be worth letting the chart be the arbitrator of possible action. The stock has been very loyal to an uptrend line from April last year on the daily chart at 4,600p – just below the present share price. But it may be wise to wait and see if this level is clearly and cleanly broken over the next few days before assuming that we have not been treated to a bear trap.