Sweetgreen Plunges 11.5% — Is This the Start of a Bearish Turn?

Summary
• Sweetgreen (SG) tumbled 11.47% intraday, trading at $14.395 with a 4.68% turnover rate.
• Unusual options activity highlights $407,059 in call trades and $234,604 in put trades, signaling whale positioning.
• Analysts maintain mixed ratings, with a $18 average target price but recent downgrades to 'Hold.'

The stock’s sharp decline has drawn sharp attention as it tests key support levels. With a 52-week high of $45.12 and a 200-day moving average at $26.08, the move reflects a stark divergence from long-term trends. Options data and analyst commentary paint a complex picture of short-term bearish pressure and long-term uncertainty.

Options Whales and Earnings Anticipation Drive Sharp Sell-Off
The intraday plunge in Sweetgreen’s shares is driven by a confluence of factors: unusual options activity, earnings anticipation, and bearish technical signals. Over $641,663 in call and put trades within the $12–$20 range suggest institutional positioning for volatility. The stock’s RSI near 63.17 hints at overbought conditions, while the 30-day moving average at $13.56 underscores bearish momentum. Analysts’ mixed ratings, including a recent downgrade to 'Hold,' add to the uncertainty ahead of the company’s earnings release in 14 days.

Restaurants Sector Volatile Amid MCD’s Mixed Performance
The Restaurants sector, led by McDonald’s (MCD -0.62% intraday), shows divergent trends. While MCD’s slight decline reflects broader sector caution, Sweetgreen’s sharp drop appears more idiosyncratic, tied to its own options-driven sell-off and earnings expectations. Sector peers like Applebee’s and Tacos Bell are testing new menus, but no direct link exists between their moves and SG’s volatility.

Options and ETF Plays for a Volatile SG Environment
• Technical Indicators: 30D MA: $13.56 (below), 200D MA: $26.08 (far below), RSI: 63.17 (overbought), MACD: 0.23 (bullish), Bollinger Bands: 15.67/13.94/12.21 (bearish bias).
• Key Levels: Watch support at $13.56 (30D MA) and resistance at $15.5 (intraday high).

Top Options:
• SG20250808P14 (Put, Expiry 08/08/25):
- IV: 123.34% (high volatility)
- Leverage Ratio: 29.92% (moderate)
- Delta: -0.4071 (sensitive to price moves)
- Theta: -0.0254 (slow time decay)
- Gamma: 0.1047 (reactive to volatility shifts)
- Turnover: $10,035 (liquid)
This put contract offers downside protection with high IV and moderate leverage, ideal for short-term bearish bets.

• SG20250808C15.5 (Call, Expiry 08/08/25):
- IV: 129.23% (extreme)
- Leverage Ratio: 12.94% (low)
- Delta: 0.4444 (moderate directional exposure)
- Theta: -0.0625 (rapid time decay)
- Gamma: 0.1017 (responsive to price swings)
- Turnover: $5,665 (liquid)
This call balances high IV with low leverage, suitable for volatility plays if SG rebounds.

Payoff Example: For a 5% downside to $13.68, the SG20250808P14 would yield $0.32 per share (vs. $0.715 strike), while the SG20250808C15.5 would expire worthless. Aggressive bears may target the put, while volatility traders might scale into the call as SG approaches key support.

Backtest Sweetgreen Stock Performance
The backtest of SG's performance after an intraday plunge of -11% shows favorable results. The 3-Day win rate is 49.45%, the 10-Day win rate is 53.39%, and the 30-Day win rate is 54.02%. This indicates that the fund tends to recover positively in the short term following a significant downturn. The maximum return during the backtest period was 10.88% over 30 days, suggesting that SG can deliver decent returns in the period immediately following a substantial market correction.

Act Now: Short-Term Bearish Bias Amid Earnings Uncertainty
The sharp decline in SG suggests short-term bearish momentum, with key support at $13.56 and resistance at $15.5. Traders should prioritize the SG20250808P14 for downside exposure or the SG20250808C15.5 for volatility. Watch for a breakdown below $13.56 to confirm bearish bias. Meanwhile, sector leader McDonald’s (MCD -0.62%) offers a contrast in performance, highlighting SG’s standalone volatility. Position now to capitalize on the earnings-driven uncertainty.