When we reviewed that charts of Wendy's (WEN) on March 4 we wrote that, "The charts of WEN have weakened since our review on Monday. Continue to avoid the long side." WEN is trading sharply higher Tuesday morning as the meme spotlight is focused on restaurant stocks.
In the updated daily bar chart of WEN, below, we can see that the shares stabilized in the back half of March and then traded higher from early April to highs in May. The stock is up at an all-time high this morning. Prices are trading above the 50-day and 200-day moving average lines. We can also see a bullish golden cross of these two averages in May.
The On-Balance-Volume (OBV) line strengthened from late January to the middle of April. The OBV line has stalled from its April peak. The Moving Average Convergence Divergence (MACD) oscillator is in a bearish mode but still above the zero line. A strong rally in WEN could quickly turn the MACD oscillator bullish.
In the weekly bar chart of WEN, below, we can see that the indicators improved in the past three months. Prices are above the slightly rising 40-week moving average line.
The weekly OBV line has improved from late February and the MACD oscillator is bullish.
In this daily Point and Figure chart of WEN, below, we can see the early trading in WEN. There is a clear upside breakout and a new price target of $43.
Bottom-line strategy: Traders who are comfortable with a sudden increase in volatility could go long WEN as close to $25 as possible. Risk a close below $22.50. The $43 area is our price target for now.