The restaurant chain Shake Shack (SHAK) is weaker in Tuesday trading as traders react to a mixed preliminary fourth-quarter results.
Let's check out the menu and the charts and see if we want to order.
In the daily bar chart of SHAK, below, I can see a mixed picture. The shares had found buying interest (support) around $45 but this level broke down in December. Prices recently rebounded but are likely to fail at the underside of the declining 50-day and the declining 200-day moving average lines.
The daily On-Balance-Volume (OBV) line shows weakness in November and December. An early January bounce in the OBV line may fail. The Moving Average Convergence Divergence (MACD) oscillator has crossed to the upside for a cover shorts buy signal.
In the weekly Japanese candlestick chart of SHAK, below, I see a mixed picture. Prices are in a longer-term downward trend and have spent a long time below the declining 40-week moving average line. The weekly trading volume has been light so prices have been falling of their own weight, so to speak.
The weekly OBV line shows a turn higher in early July suggesting that buyers of SHAK turned more aggressive. However, aggressive buying has not translated into price gains for SHAK. The MACD oscillator is still below the zero line.
In this daily Point and Figure chart of SHAK, below, I see a downside price target in the $31 area.
In this weekly Point and Figure chart of SHAK, below, the software suggests a price target of $31.
Bottom-line strategy: Danny Meyer is a talented restaurateur but I think the industry is facing some tough macro headwinds. I would avoid the long side of SHAK.
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