Chipotle Mexican Grill (CMG) has sent bearish ripples through the casual-dining sector this morning, creating some additional bearish charts. I have moved to the sidelines there after a big drop in the stock, which put the ratio put spread into the high teens this morning. Of course, the ratio call spread was worthless, but buying just above $11 on both the ratio spreads and getting out a little over $17 on the put spread still makes it a decent trade. Many names have already broken down and look like it may be a little late to chase. For instance, take a look at DineEquity (DIN) and Darden Restaurants (DRI).
DIN trades in a bearish channel going back over the last two months. Price bounced off the lower support channel several times recently. The area to short appears to be the top end of the channel or on a close under the channel. The Commodity Channel Index (CCI) and Force Index could create higher lows should they turn, but trend, momentum and sentiment are not favorable. As long as the 10-day simple moving average (SMA) remains in the middle of this bearish channel and price below the 10-day SMA, there is little reason to try to pick a bottom.
DRI isn't in much better shape. The bearish channel is younger in maturity, which is one positive; however, the 10-day SMA aligns with the resistance of the channel, so we are faced again with not looking bullish until that level is recaptured. The concept of higher lows isn't present either and Darden faces additional resistance just below $66. If anything, DRI may not look quite as bearish as DIN due to the immaturity of the move, but the downside looks greater.
Cracker Barrel Old Country Store (CBRL) is the least bearish of these three, but offers the most downside. The stock is trading below both its 10- and 50-day SMA, but price is still holding support. The Bollinger Bands are notably tighter than the previous two names, while the RSI and Ultimate Index are slightly stronger. While those indicators may be higher in value, they trouble me as they look headed lower in front of price. Should CBRL lose $138.70, this is one that looks vulnerable to a quick cascade lower by at least 10%. Earnings are still a month away, so if price does trigger short, I will look to get short shares and use the 10-day SMA as a possible stop and the 50-day SMA as a hard stop loss point. Conservative traders could see the $140-$142 area as well if the trigger were to occur in the next two days.