Darden Restaurants (DRI) are a popular group of restaurant chains (Olive Garden and LongHorn Steakhouse among others) that I have dined at but today I want to review the charts and indicators and not the menus. A sell-side firm downgraded the share to "hold" from "buy".
In this daily bar chart of DRI, below, we can see that prices made a bottom in the May/June/July timeframe. DRI rallied into November but not everything is good in the back of the house. Trading volume has declined from the pace set in June. The On-Balance-Volume (OBV) line has moved higher the past year which is bullish. The slopes of both the 50-day and the 200-day moving average lines are positive.
The 12-day price momentum study in the lower panel shows weaker readings from late October through November even though prices have moved higher. This condition is a bearish divergence and can foreshadow a price reversal.
In this weekly Japanese candlestick chart of DRI, below, we can see the past three years of price movement. The two most recent candles are spinning tops. Spinning tops have small real bodies and tell us that bulls and bears are close to a balance. A weak candle or bearish candle this week would result in a top reversal (red real body) and turn the trend from up to sideways or down.
The weekly OBV line is not strong and the MACD oscillator is bullish but just now starting to narrow.
In this daily Point and Figure chart of DRI, below, we can see an upside price target in the $153 area. Not all that much above the market. A trade at $139.38 is likely to weaken this chart picture.
In this weekly Point and Figure chart of DRI, below, we can see an upside price target in the $208 area.
Bottom line strategy: Shares of DRI are still in an uptrend but two recent spinning tops on the weekly candle chart suggest caution on any new longs and older longs. Raise stops on any longs to $140.
