For his "Executive Decision" segment of Mad Money Friday night, Jim Cramer spoke with Todd Penegor, president and CEO of The Wendy's Co. (WEN) , the fast-food chain that's moving into the breakfast category in a big way.
Penegor explained that breakfast has been a growing category for a long time and Wendy's is offering a great menu of products that are redesigned to compete. The company's franchisees love their low-cost, high-return model that makes efficient use of labor. Overall, Wendy's will be hiring 20,000 new employees to meet the demand.
Wendy's has seen a lot of success in social media, and Penegor said that's because of their lighthearted and fun approach that pokes fun at themselves as much as it does their competition. Social media has added a new level of engagement with their customers.
Turning to other operational issues, Penegor said that speed and consistency remains a priority for Wendy's. They continue to focus on mobile ordering, where checks are typically 20% higher than at the counter, and on delivery which is available in select markets.
Finally, Penegor said they're happy to reward shareholders with a 20% dividend boost and share repurchase program. All these things sound like positive fundamental developments so let's see if that matches up on the charts.
In this daily bar chart of WEN, below, we can see that prices have been in an uptrend from late December, similar to the broad market movement. Prices tested the rising 200-day moving average line in early August and we can see a gap lower in September that temporarily broke the rising 50-day moving average line. Prices made a strong move on Friday and filled a large part of that August gap.
The daily On-Balance-Volume (OBV) line shows a positive trend the past 12 months telling us that buyers of WEN have been more aggressive and the line is close to making a new high for the move up.
The Moving Average Convergence Divergence (MACD) oscillator is just below the zero line but it too looks close to turning upwards to a fresh buy signal.
In this weekly bar chart of WEN, below, we can see that prices have more than doubled in the past three years. Not a bad rate of return.
Prices are above the rising 40-week moving average line and the weekly OBV line shows a new uptrend from February of this year.
The weekly MACD oscillator is more bullish than the daily time frame and has been bullish since March of this year.
In this Point and Figure chart of WEN, below, we can see that the software has projected an upside price target that would take prices to a new high. This could be a breakout for still further gains in the months ahead.
Bottom line strategy: Traders and investors could approach WEN from the long side at $21 or better, and risk below $19 while looking for gains to new highs.