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Panera Bread Done Rising?

PNRA has broken below an uptrend line dating back to 2008


Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free Weekly Market Outlook Video here.

Panera Bread Co. (PNRA) — The bakery-cafe operator rose more than 500% over the course of the past five and a half years. Along the way, it was continually subjected to healthy mean-reversion moves that allowed it to cool off and lessened the danger of a more meaningful collapse.

At some point, however, most stocks settle into better correction patterns that last more than a few weeks, and from the developments that I am spotting on this stock’s multi-year chart, it looks like such a time has come for PNRA.

PNRA Chart
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To smooth out the stock’s long run up I am using a logarithmic chart. In a nutshell, a logarithmic scale displays the value of price using intervals corresponding to orders of magnitude, rather than a standard linear scale.

On a weekly basis, PNRA has now broken below the uptrend line that began in 2008, which is a significant development by all accounts. Given how long the uptrend stayed intact, I don’t expect the stock to deteriorate in one fell swoop. Rather, I would expect plenty of backing and filling, but in a fashion that allow bears to sell the rips.

PNRA Chart
Click to Enlarge

From a closer-up perspective on the daily chart, PNRA has now meaningfully flushed below its 200-day simple moving average (red line) for the first time in roughly 12 months, which coupled with the context of the first chart, paints a weak picture.

In the immediate term, the stock has better lateral support toward the $155 mark, where some sort of a bounce looks probable. But unless PNRA can recover the long-term uptrend, I suspect the trend is lower.

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