Cheesecake Factory (CAKE) has made a decent advance in the past 12 months but the recent weak price action and indicator erosion suggest that weakness is possible in the days ahead. The popular moving averages have not yet turned down but prices have closed below the 50-day moving average line and the On-Balance-Volume (OBV) line is soft.
Let's take a slice of the charts and indicators below.
In this daily bar chart of CAKE, above, we can see prices traded in a sideways, rectangle-like consolidation pattern through to October. Prices started to break out on the upside in late October. Both the level of trading volume and the OBV line increased in late October. There is another consolidation pattern from early December but it is not bullish. In late April, prices push up over the December highs but the trading volume and the OBV line have muted responses. Earlier this month, CAKE gaps lower and volume expands sharply. CAKE closes below the rising 50-day moving average line and the daily OBV line turns down. The Moving Average Convergence Divergence (MACD) oscillator also turns down and is poised to close below the zero line for an outright sell signal.
In this weekly chart of CAKE, above, we can see prices are above the rising 40-week moving average line. The weekly OBV line made a bounce in a downtrend and the MACD oscillator is still declining.
In this Point and Figure chart of CAKE, above, we can see the minor breakdown in price at $61 and the possible downside price target of $55.
Bottom line: Baking is very much a science and technical analysis is part art and part science. Both the art and the science part of technical analysis suggest that longs should sell CAKE here rather than seeing prices slip lower.