Time to Make the Donuts

• Posted by Greg Harmon
• on March 20th, 2012

There are two major combatants in the donut wars, Krispy Kreme Doughnuts, $KKD and Dunkin’ Brands, $DNKN. Both have had strong moves higher off of a base in December and have been flagging and looking to test lower. But Tuesday after the bell Krispy Kreme reported earnings and and the reaction was a leap higher over resistance in after hours trading (the * on the chart below). With this move there is some insight on how they both may trade in the short term. Take a look. Krispy Kreme had been in a bull flag that was getting extended prior to the report. But the Relative

Krispy Kreme Doughnuts, $KKD

Strength Index (RSI) was bullish and rising awhile the Moving Average Convergence Divergence (MACD) indicator was a bout to cross positive, both supporting an upside move. Now that it has happened if it can hold over 8.75 there is resistance higher at 9, 9.50 and 9.92. It would also trigger a target of at least 12.20 on the confirmation of an Inverse Head and Shoulders pattern. This is all good news. But will it flow over into Dunkin’ Brands? The chart below ended Tuesday in a much less bullish mode. The RSI has been working off a technically over bought condition for about a week and the MACD has been fading back to the zero line. It is also very extended from the 50 day Simple moving Average (SMA) still almost 9% above it. This is not a chart that jumps out as

primed to ride the Krispy Kreme coattails higher. In fact a continued pullback to support at 30 looks likely. Fred looks tired. The only short term good news in this chart is the Hollow Red Candle Monday, signifying a bullish intraday move, followed by a doji, may be signalling a turn back higher. A move over 31.50 would confirm that.

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