Thursday, August 31, 2006

Restaurants and Coffee Shops - Reversing out of Downtrends?

Since early May, the larger coffee shops -- SBUX, PEET, and CBOU -- have shed about 25% in price. CBOU bottomed out at $6 (down 40%) on 8/7, but moved back up to $7.65 by 8/30.

By comparison, COSI (which calls itself a "convenience dining restaurant" and has some coffee shops/kiosks in Macy's stores), is still down 45% from its high of $11 in early May, after a 4-month downtrend:

A head-and-shoulders bottom has formed over the last 6 weeks, and the most recent trading day shown (8/30) has double the 20-day average daily volume. The implied volatility is currently pretty high (over 70%), so I'm considering a covered call play to try to put delta, vega, and theta in my favor.

Also of interest in the Restaurants industry:
  • CAKE appears to be coming out of a 4-month downtrend with a head-and-shoulders bottom.
  • CEC has a 1-month rising wedge after downtrending for 3-months. Bearish signal?
  • RARE completed a successful head-and-shoulders bottom (though the breakout did not occur with strong volume), including a retest of the neckline. Will it now make a higher high?
  • PFCB has made a higher high and higher low after a 6-month downtrend. Will it make another higher high?
  • RRGB has been in a very wide-swinging 14-month downtrend. The $44 level is significant resistance. There is support around $40. Play the downward bounce to support?


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