A buy side firm started their fundamental coverage of the restaurant chain Texas Roadhouse ( TXRH) with a "buy" rating. Let's check the charts and indicators for the technical side of things.
In the daily bar chart of TXRH, below, we can see that the shares have declined from late July to twin lows in May and June. Prices have tested the declining 50-day moving average line over the past several months and we could see a close above the 50-day line in the days ahead. The declining 200-day line intersects around $85.
The daily On-Balance-Volume (OBV) line made a low in late January followed by an uneven rise. The trend-following Moving Average Convergence Divergence (MACD) oscillator made a low in May and a higher low in June even though prices made equal lows. This is a bullish divergence and tilts me to be more optimistic about prices in the near-term.
In this weekly Japanese candlestick chart of TXRH, below, we can see that prices have declined from early 2021 to May and June of this year. We can see a number of lower shadows in the $70 area telling us that traders are rejecting the lows in that area.
The weekly OBV line has moved sideways the past seven months. The MACD oscillator is pointed lower but has narrowed and we could see a cover shorts buy signal in the weeks ahead.
In this daily Point and Figure chart of TXRH, below, we can see an upside price target in the $94 area.
In this weekly Point and Figure chart of TXRH, below, we can see a downside price target in the $51 area but a trade at $84 or higher should improve the picture.
Bottom-line strategy: Traders could go long TXRH on a dip to around $75 if available. Risk to $68. Look for a rally to the $94 area by early August. Traders should not overstay their welcome.
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