Panera Heating Up

 | Aug 02, 2013 | 7:00 AM EDT  | Comments
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pnra

Many of the trade setups that I've shared have started with analysis on a weekly chart. Sometimes backing up and looking at the forest, rather than the trees, can help you identify some excellent trade setups -- and I think that's what we're looking at right now in Panera (PNRA). The daily chart, I have to admit, looks like garbage. But the weekly shows some promise.

Panera (PNRA) -- Weekly
Source: Dynamic Trader

What immediately stood out to me here was the symmetry, or similarity of price swings in the same direction. Thus far, the current pullback has seen the stock drop by $29.22, so I compared that with a few prior major declines. One of these, a swing into the August 2006 low, brought the stock down $29.63. A slide into the October 2008 low came to $30.78, and another -- into the June 2012 nadir -- totaled $30.59. Given the similarities among all of these moves, I call them "symmetrical."

As a result, I've projected all of these price declines from the most recent high. When we take those key 100% projections -- aka measured moves -- we see they overlap with quite a few other key Fibonacci price relationships. Altogether, they create a price cluster of support at the $162.45-to-$165.95 area. Below is another standout support zone, between $154.01 and $158.67.

So we are looking at some buy setups on this Panera chart -- and, using the 30-minute chart, I'm already seeing some buy signals against that first price cluster. I have illustrated the trade "trigger" below.

Panera (PNRA) -- 30-Minute
Source: Dynamic Trader

Before we can even consider a buy entry, we have to see the price test and hold above a key price level -- and that is what we saw on the weekly chart regarding that first price cluster. In addition, on the 30-minute chart, the eight-day exponential moving average crossed back above the 34-day EMA, and Panera took out a prior swing high.

With all that in place, the initial risk on this setup can now be defined below the $165.55 swing low. If you want to give it a bit more room, you can define risk below the low end of the cluster zone.

If Panera can pull itself up off the ground, even a corrective rally could take the shares near $180. So, to sum up, I'm taking buy signals in this stock as long as one of these two key support areas hold up. I will consider myself wrong if the stock drops beneath both of these key areas.

For more information on trade triggers, please refer here.

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