Back on December 15 we reviewed the charts of Darden Restaurants (DRI) and recommended avoiding the long side of the popular restaurant chain. Prices have continued to weaken to the point of an important downside shift.
Let's check on the charts again.
In this daily bar chart of DRI, below, we can see that prices have just broken below the lows of January and June. Anyone who has bought DRI in the past year is "under water". Prices are below the declining 50-day moving average line and the declining 200-day line. If we look closely we can see that the 50-day line crossed below the 200-day line in early February for a bearish dead or death cross of these two math-driven indicators. The trading volume has increased in recent days telling me that traders are voting with their feet.
The On-Balance-Volume (OBV) line shows weakness from early July. The Moving Average Convergence Divergence (MACD) oscillator is below the zero line for a sell signal.
In this weekly Japanese candlestick chart of DRI, below, we can see that prices have made a top pattern going back to March 2021. We can imagine a "neckline" across $130 and that has been broken. Prices are trading below the declining 40-week moving average line.
The weekly OBV line has been drifting lower for months. The MACD oscillator crossed to the downside in April 2021 and now it is crossing below the zero line.
In this daily Point and Figure chart of DRI, below, we can see a potential downside price target in the $103 area.
In this weekly Point and Figure chart of DRI, below, we used a five-box reversal filter. Here the software projects the $73 area as a possible downside price objective.
Bottom line strategy: DRI is breaking below a large top formation and a significant downside risk is looming. Consider some takeout but I would not purchase the stock.
