Trade of the Day: Ruby Tuesday (RT)

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When you think of fast-growing restaurant chains, you probably think of companies like Chipotle (CMG) and Noodles & Company (NDLS)…not so much Ruby Tuesday (RT). And there’s a good reason for that.

Casual-dining restaurants like RT are losing more and more ground to upstarts in the fast-casual and limited-service arenas, which dominated the list of Top 10 Growth Chains. Overall, U.S. restaurant visits are down by 1.3 billion since 2008, according to Bloomberg Businessweek; meanwhile, chains focusing on cheaper fare like burgers and sandwiches are taking an ever-growing slice of the remaining pie. So this shift may simply be a byproduct of Americans looking to cut costs in the “food and dining” area of their budgets.

Ruby Tuesday certainly hasn’t come out of this environment unscathed: It announced in January that it will close 30 restaurants, and shares are down 12% since then. But there may be more trouble in store for RT stock. At the Sept. 18 close, the Profit Scanner powered by Recognia identified a bearish Symmetrical Continuation Triangle on RT’s chart that carries anywhere from 12%-14% further downside.

On that day, RT closed at $6.11, and the pattern emerged on more than 200,000 shares traded. This bearish Symmetrical Continuation Triangle has a target range of $5.20-$5.35 in the next 29 trading days, and it is the fifth bearish event to emerge on Ruby Tuesday’s chart in September alone.

Trade of the Day: Ruby Tuesday (RT)

A bearish Symmetrical Continuation Triangle shows two converging trendlines; the lower one is ascending, the upper one is descending. The formation occurs because prices are reaching both lower highs and higher lows. The pattern will display two highs touching the upper (descending) trendline and two lows touching the lower (ascending) trendline, of which the RT chart shown above is an excellent example.

Before entering their bearish positions, traders should note that Profit Scanner has identified short-term support right at the $6.10 level, which may act as a floor. More conservative traders would look for a break below $6.10 before entering the trade, as this would signal a further decline — and luckily, that looks to be the case in early Monday trading.

On the flip side, short-term resistance lies at $6.19, so a rally above that level could mean further upside; watch out for that as well.

For those looking to set a protective stop, the Profit Scanner places a tight stop on the trade at $6.36. However, if all goes as planned, RT will keep moving lower below $6.10 support into the targeted $5.20-$5.35 range. One factor to monitor is volume: If there’s no pickup in volume while RT is on this downswing, be wary – but if there’s a definite surge in volume, that’s solid confirmation of the bearish pattern.

Profit Scanner powered by Recognia can help traders of all levels uncover these signals to determine the best timing to buy. Or use Profit Scanner’s technical insight to validate your own trading ideas. See how easy this powerful tool is to help you uncover hidden opportunities in the market.


Article printed from InvestorPlace Media, https://investorplace.com/2014/09/trade-day-ruby-tuesday-rt/.

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