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A Bullish/Bearish Case for PF Changs PFCB

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January 03, 2012 – Comments (0) | RELATED TICKERS: PFCB

P.F Changs ticket PFCB has a bullish looking set up for this stock with lots of potential if the bulls can regain control because as you will see below there is some strong downside risk. 

The Set-up: PFCB keeps testing the 31.80 resistance and has remained in a tight range over the past few weeks.  A breakout of 31.80 would mean a break out of its range and a triangle pattern- both bullish.  In addition this stock's short interest is at 24% and has a short ratio of 9.78).  What makes this stock even more compelling is the huge gap above which is a potential target for it.  The bottom of the gap is 12% higher from the breakout level and a full gap fill would mean a 20% move higher from the breakout of 31.80. The consolidation plus the potential make this stock very compelling as a long play.

The Play: The best way to play this is to wait for the breakout since it gives the stock the momentum you will want and a good stop-loss level. Not waiting for this breakout could set you back a lot since there is a potential for a 30% downside move based on the weekly chart.   

The Risk/Bearish Trade: The weekly chart shows some downside potential for this stock if it breaks the triangle that it has formed to the downside.  What the weekly chart is showing is a stock that has declined over 30% and is now consolidating forming a pennant or consolidation pattern.  If this pattern breaks the bottom of the triangle it is possible to have another 30% move to the downside as it would mean a continuation of the downtrend. This would putt P.F Changs right at it's 2009 low.  This is why you want to wait for the breakout of the 31.80!!!!  But if PFCB breaks below  29.00 it would be a decent looking short. 

Here is the chart analysis on PFCB

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