Bullish

Olive Garden Owner Darden Still Lacks Bullish Ingredients

During Tuesday’s Mad Money program host Jim Cramer told viewers that among the restaurants, he recommended Darden Restaurants Inc. (DRI) and Chipotle Mexican Grill (CMG) as big winners.

When we looked at the charts of DRI on Sept. 22 ahead of earnings, we wrote that “I find it a challenge to arrive at a clear strategy when the price action is pointed up (higher targets from the Point and Figure charts), but the On-Balance-Volume line has rolled over… with the indicators mixed I would take a neutral stand for now.”

Let’s check out DRI again.

In this daily Japanese candlestick chart of DRI, below, we can see some recent upper shadows above $105. Trading volume has declined recently and the On-Balance-Volume (OBV) line has turned a little lower suggesting a shift toward more aggressive selling.

The Moving Average Convergence Divergence (MACD) oscillator is close to a bearish crossover. 

  

 

In the weekly Japanese candlestick chart of DRI, below, we have a mixed picture. Prices are in an uptrend and trading above the bottoming 40-week moving average line. Trading volume continues to decline from the heavy action in March. The $110-$130 area looks like a large area of potential resistance. The weekly OBV line is leading the price action as the OBV line has made a new high, breaking above the highs of 2018 and 2019.

 

The MACD oscillator crossed above the zero line last month for an outright buy signal. 

 

 

 

In this Point and Figure chart of DRI, below, we can see a potential $129 price target. 

 

 

 

Bottom-line strategy: The price action since our Sept. 22 review has not moved the needle for me enough to get behind a long recommendation. Despite my reluctance, traders should probably use a sell stop at $96 to protect gains.

 

(Chipotle is a holding