Pancakes over Steaks in Restaurant Stocks
- Posted by Greg Harmon
- on August 27th, 2012
Two small but popular chains can show the dichotomy in the restaurant space, DineEquity, $DIN and Ruths Chris Steak House, $RUTH. DineEquity is that fine establishment that puts forth endless pancakes at IHOP and neighborhood family dining via Applebee’s. The daily chart below shows that
the stock is building a bull flag under resistance at 54 with a Measured Move on a break out higher to 63. Some will be quick to point out that the Relative Strength Index (RSI) is elevated, but the Moving Average Convergence Divergence indicator (MACD) is trending back higher and near a bullish cross. The weekly view shows it breaking a massive 18 month Symmetrical triangle higher
with a target of at least 60 and the 3-box reversal Point and Figure chart (PnF) carries a price objective of 82. That is a lot of pancakes! On the other end of the spectrum, Ruths Chris Steakhouse owns the signature brand of upscale Steakhouses and the Mitchell’s Seafoods restaurants. The daily chart for Ruths shows it pulling back from a short term double top at 6.92 and struggling for support at 6.00 Below that there would be a target of 5.00. The RSI is bearish
here and the MACD negative, both supporting more downside. The weekly view shows the movement since May in a bear flag with a downside continuation target of 4.75. Is the restaurant business this easy to trade? Sell the luxury and buy the all you can eat? This view seems like it.
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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
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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