Traders Should Pass on a Piece of CAKE

by Sam Collins | August 20, 2013 1:46 am

The Cheesecake Factory (CAKE[1]) — This operator of upscale, casual dining, full-service restaurants is suffering from weak same-store sales growth due to higher payroll taxes. Analysts are of the opinion that, in the current economic climate, the company will have a difficult time passing on increased costs to their customers.

The stock rose almost 35% in the past six months and appears to be topping. It failed to make a new high along with the major indices in early August, and selling pressure is building.

Its 20-day moving average (green line) is falling fast and should cross its 50-day moving average (blue line) soon for a short-term sell signal. MACD also issued a sell signal.

The support line at just under $40 could stabilize the stock, but it appears headed for a protracted downtrend. Sell CAKE if you own it.

CAKE Chart
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Chart Key[2]

  1. CAKE:
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