Even in a Down Market People Gotta Eat – Restaurants Hold Up
- Posted by Greg Harmon
- on July 11th, 2011
With the broad market indexes down 1.5 – 2.0% restaurant stocks held up remarkably well. And it did not matter how much you were going to spend for dinner. From McDonald’s (ticker: $MCD) or the casual dining of Applebee’s or International House of Pancakes from Dine Equity (ticker: $DIN) all the way up to high end restaurants like Ruths Chris Steak House (ticker: $RUTH) or Morton’s Restaurant Group (ticker: $MRT), these stocks held up well. let’s take a look.
McDonald’s, $MCD, has posted back to back bull flags after completing a ‘W-V’ pattern. the current bull flag is allowing the Relative Strength Index (RSI) to work off a technically over bought situation. Watch 84.50 as a point where the flag may break lower and end this streak, but if it can get over 86.10 then it has Measured Moves (MM) to 88.20 and then 90.20
Dine Equity, $DIN
Dine Equity, $DIN had a positive day and remains within striking distance of the resistance at 56.00. The RSI is trending higher, although bounced briefly off of the 70 level, and the Moving Average Convergence Divergence (MACD) is positive, but waning as is builds a bull flag within the expanding descending triangle. If it can break above 56 then it has resistance at 60 and a MM target to 66. Under 53 it looks better to the downside and bottom of triangle.
Ruths Chris Steak House, $RUTH
Ruths Chris Steak House, $RUTH, broke a long descending triangle in early June and then a bull flag later in the month to move higher. It is now in another bull flag after a steep move higher. The RSI is working off being overbought and the MACD is strong an positive, but starting to wane. If it can get above the flag at 6.64 then it has a MM target to 7.65. A fall below 6.20 would negate that.
Morton’s Restaurant Group, $MRT
Morton’s Restaurant Group, $MRT, also had a positive day moving back toward resistance at 7.75, and maintaining a bull flag within the expanding wedge. It has a RSI that is moving sideways in bull territory and a MACD that is positive but starting to wane. If it can get over 7.75 then it has a MM to 8.80. A break below 7.40 would make more attractive to the downside and the bottom rail support.
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Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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