Brinker International, Inc. (NYSE: EAT) seems to be poised for a price surge as per its latest charts. The American multinational hospitality industry company owns Chili’s and Maggiano’s Little Italy restaurant chains.
The stock was also a part of our recent watchlist for breakout stocks.
#1 Symmetrical Triangle Pattern: The daily chart shows that the stock has been forming a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This pattern is marked on the daily chart as orange color lines. The breakout from a symmetrical triangle pattern usually signifies a bullish move.
#2 Price above MAs: The price is currently above the short-term moving average of 50-day SMA, indicating that the bulls are gaining control. This is a positive indication.
#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered bullish.
#4 Bullish ADX: The ADX indicator shows that the +DI line is currently above the –DI line and the ADX line has started to move up from below –DI and +DI lines. This indicates possible bullishness.
#5 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#6 Fibonacci Support: Usually, after an up-move, stocks typically retrace to any of the key Fibonacci levels before surging back again. The stock had taken support at the 38.2% Fibonacci support level before moving higher, as seen in the weekly chart. This indicates bullishness.
#7 %K above %D: The %K (blue) line of stochastic has currently crossed above the %D (Orange) line in the weekly chart as well, and is also moving higher from oversold levels. This is a possible bullish indication.
#8 Bullish RSI: In the weekly chart, the RSI is currently at 50 and moving higher. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of EAT above the price of around $40.
TP: Our target prices are $44 and $49 in the next 3-6 months.
SL: To limit risk, place stop-loss at $37.50. Note that the stop-loss is on a closing basis.
Our target potential upside is 10% to 23% in the next 3 to 6 months.
For a risk of $2.50, our target rewards are $4.00 and $9.00. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the symmetrical triangle pattern with a high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
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