Shares of bakery cafes operator Panera Bread Co (PNRA) rebounded during the past couple of weeks after tumbling on the back of the company’s third-quarter results. From a technical perspective, PNRA stock still is well-positioned in both the near- and long-term, and both traders and investors alike can take advantage of Panera’s clearly defined lines of risk and reward.
After the close of trading Oct. 28, Panera Bread reported Q3 earnings of $1.46 per share to top analyst estimates by 4 cents. Meanwhile, revenues came in line at $620 million. On a year-over-year basis, both the top and bottom lines grew 8%.
PNRA continues to expand, opening 28 cafes last quarter — 13 are company-owned, while the rest are franchised. So far in 2014, Panera has opened 35 company-owned cafes.
Panera also repurchased about $29 million shares of PNRA stock as part of its share repurchase program.
However, one troubling issue from the report: Panera lowered its guidance for fiscal 2014 from a previous range of $6.65-$6.80 to a new range of $6.60-$6.70. Analysts were looking for $6.66.
PNRA Stock Charts
On the weekly multiyear chart, we see that in the bigger picture PNRA stock continues to trade in a widening range, or what some technical analysts may refer to as a megaphone pattern. After topping in June 2013, Panera stock created a lower high in March of this year before retesting the lower end of the pattern for the first time in years. In late July to early August, the stock then began to climb again, and now, while PNRA still is holding its long-term support line, it’s also trading within the context of a series of lower highs.
Zooming in on the daily chart, we note that PNRA stock dropped about 5.5% on Oct. 28 after the aforementioned earnings report, but that drop was short-lived and supported by the confluence of both the 50- and 200-day simple moving averages (yellow and red lines, respectively). Over the past two weeks, Panera rose again and nearly made it back to up the mid-October reaction highs, thus creating a defined diagonal line of resistance.
On the downside, confluence support made up of the moving averages as well as the August support line currently hovers around the $160-$163 area.
Active investors and traders now have clearly defined areas of support and resistance. Specifically, should PNRA stock be able to break past the $171 level on a daily closing basis, upside could open up into the $180 area on a trading basis.
On the downside, a drop below the $160 area could put the stock at risk of a retest of the July lows around $140.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.
