Darden Restaurants (DRI) is set to report its latest quarterly results on Thursday before the opening bell. We last reviewed the charts and indicators back on June 5 and wrote that, "The U.S. economy is restarting and bigger chain restaurants should soon have the ability to open their outside and later the inside for dining. DRI is pointed up and could see further gains. Traders could go long risking a close below $75."
With hindsight we can see that traders would have been stopped out with a loss. Let's see what the charts look like now.
In this updated daily bar chart of DRI, below, we can see that prices have finally eked out a gain above the early June high. Prices have been trading above the declining 200-day moving average line all month. The shorter 50-day moving average line is in an uptrend.
The On-Balance-Volume (OBV) line has weakened this month and has been unable to break its June high. This is a small bearish divergence but it is worth noting for the record.
The Moving Average Convergence Divergence (MACD) oscillator is above the zero line but pointed downward in a take profits sell signal.
In this weekly bar chart of DRI, below, we see a weakening picture. Prices are trading above the 40-week moving average line but its slope is negative.
The weekly OBV line looks like it has topped out in August and its weakness suggests a shift to more aggressive selling. The MACD oscillator is still below the zero line.
In this daily Point and Figure chart of DRI, below, we can see a potential upside price target of around $101.
In this weekly Point and Figure chart of DRI, below, we can see a potential upside price target in the $118 area.
Bottom line strategy: I find it a challenge to arrive at a clear strategy when the price action is pointed up (higher targets from the Point and Figure charts), but the On-Balance-Volume line has rolled over. I have no special knowledge of Thursday's earnings figures for DRI but with the indicators mixed I would take a neutral stand for now.
