Panera Bread Done Rising?

by Serge Berger | July 26, 2013 1:51 am

Panera Bread Done Rising?

Serge Berger is the head trader and investment strategist for The Steady Trader[1]. Sign up for his free Weekly Market Outlook Video here[2].

Panera Bread Co. (PNRA[3]) — 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.

07 26 13 prna weekly 300x173 Panera Bread Done Rising?
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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.

07 26 13 prna daily 300x186 Panera Bread Done Rising?
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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.

Endnotes:
  1. The Steady Trader: http://thesteadytrader.com/
  2. free Weekly Market Outlook Video here: http://www2.marketfy.com/l/15492/2013-05-06/4sf47
  3. PNRA: http://studio-5.financialcontent.com/investplace/quote?Symbol=PNRA

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