Phat (or Fat) Trade Ideas

• Posted by Greg Harmon
• on June 27th, 2012

With the approval of Arena Pharmaceutical’s, $ARNA, weight loss drug, Boll Weevil or whatever it is called, I thought it made sense to look for ideas in the ‘food that makes you fat’ space, since now you can eat til you pass out and just take a pill to cure it (if they are chocolate flavored that would be perfect). Surprisingly the logical suspects, fast food and donuts, don’t look so great.

Dunkin Brands, $DNKN

Dunkin Brands, $DNKN, has had a nice trend higher but recently pulled back to the 20 day Simple Moving Average (SMA). After a bounce it made a lower high today and completed a Bearish Engulfing candle, setting up for more downside if confirmed. With the extension from the 50 day SMA which has been support that looks like good target for an entry. Try selling some July 32.50 Puts.

Krispy Kreme Doughnuts, $KKD

Krispy Kreme Doughnuts, $KKD, was on the verge of breaking above a symmetrical triangle until it also printed a Bearish Engulfing candle Wednesday. With a Relative Strength Index (RSI) that remains in bearish territory a trip to the bottom of the triangle seems in order now. Nothing to do here on the long side until it is over 6.75.

McDonald’s, $MCD

McDonald’s, $MCD, also looked promising, after the Spinning Top confirmed higher Tuesday, but a Bearish Engulfing candle took away those hopes today. This also has a RSI that is in bearish territory. Wait for a long entry until over 90.60 or go short under 87.60.

Arcos Dorados, $ARCO

Arcos Dorados, $ARCO, or the McDonald’s of Latin America, is the one exception. It broke out of an ascending triangle and over the 50 day SMA to close near the high with a Marubozu candle. The target on the breakout is 17.60. I bought a small position on the close and will look to add in the morning.

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