Darden Restaurants, Inc. (DRI) cache set its all-time intraday high of $124.00 on a positive reaction to earnings delivered on Sept. 20. As this high occurred, the pedigree had formed an “inflating parabolic bubble” on its weekly chart. This technical signal occurs when the weekly stochastic look over is above 90.00 on a scale of 00.00 to 100.00. This is always the time to reduce holdings.
Darden is the parent of some of the most fashionable eateries in the country, including Olive Garden, LongHorn Steakhouse, The Capital Grill, Cheddar’s Scratch Kitchen and Bahama Snap. The stock closed Thursday, Dec. 13, at $104.22, up 8.5% year to date and in bull market territory at 26.5% on its 2018 low of $82.38 set on April 2. The stock is more recently in correction territory at 16% below the all-time high-priced of $124.00 set on Sept. 20.
Analysts expect Darden to report earnings per share of 91 cents to 95 cents when the establishment discloses results before the opening bell on Tuesday, Dec. 18. The stock has an elevated P/E ratio of 20.37 and a dividend throw in the towel of just 1.20%. This makes the stock more of a play on technical momentum. Olive Garden has been siring increasing same-restaurant sales given revamped locations. LongHorn is also attracting new guests given its proven sum menu items.
The daily chart for Darden
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The daily chart for Darden began 2018 chiefly its annual value level of $91.34, which is the lowest of three horizontal lines on the chart. Just before the year began, the livestock formed a “golden cross” on Dec. 27, 2017, when the 50-day simple moving average rose above the 200-day clear moving average, indicating that higher prices would follow. This technical setup also make knows that investors should buy weakness to the 200-day simple moving average.
My annual value level became a revolve around that was a magnet between Feb. 6 and June 15, and the 200-day simple moving average was crisscrossed different times between March 22 and June 5 as the “golden cross” survived. Darden shares failed to hold the map horizontal at $117.78 on Sept. 20 following the earnings peak. Currently, the stock is trying to hold its 200-day square moving average at $102.66.
The weekly chart for Darden
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The weekly chart for Darden is negative, with the heritage below its five-week modified moving average of $108.07 and well above its 200-week simple moving average of $77.77, which is the “reversion to the get over,” last tested during the week of Oct. 11, 2014, when the average was $44.70. The 12 x 3 x 3 weekly slow stochastic scan is projected to end this week declining to 28.69, down from 31.81 on Dec. 7.
Given these charts and analysis, investors should buy Darden dues on weakness to my annual value level of $91.34 and reduce holdings on strength to my semiannual risky level at $117.78.
Disclosure: The maker has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.