Shake Shack Inc. (SHAK) was downgraded by Credit Suisse a day after it posted a sales update. I have only eaten at Shake Shack once so I may not be a good fundamental judge of the company, so let's just stick to the charts and indicators.
In the daily bar chart of SHAK, below, we can see that prices have been in a downward trend since September telling us that at least part of the decline had nothing to do with the coronavirus. Prices are below the declining 50-day simple moving average line and the declining 200-day moving average line. Back in December we can see a bearish death cross of the 50-day and 200-day averages.
The daily On-Balance-Volume (OBV) line has followed prices up and down the past 12 months but it is dangerously close to making a new low for the move down which would tell us that sellers of SHAK remain more aggressive.
The Moving Average Convergence Divergence (MACD) has been below the zero line for much of the time since October and is still not bullish.
In the weekly bar chart of SHAK, below, we plotted all of the company's public history. Prices have found buying interest or support around $30 many times but that support may well give way in the weeks ahead. The slope of the 40-week moving average line is negative.
The weekly OBV line is already in new low territory telling us that sellers of SHAK have been and are more aggressive now unlike the other times the stock was trading around $30. The MACD oscillator is bearish on this longer time frame.
In this daily Point and Figure chart of SHAK, below, we can see a tentative downside price target in the $17-$16 area.
Bottom-line strategy: Restaurants seem particularly vulnerable in the new stay-at-home economy. The charts are weak and we have a downside target in the $16 area from the Point and Figure chart. New lows on the chart will mean that the $30 area will turn from support to resistance. Avoid SHAK.
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