Monday, April 06, 2009

Weekly Stock Pick

Buy Sell Hold
The Week Ahead in the Market

As I scan the charts this early Monday morning looking for a low-risk high-reward stock pick, I’m looking at the week ahead for the markets. Is the rally going to continue or not? I’m betting not as I see it as a bear market rally now hitting major resistance. First quarter earnings season is starting. We shall see what kind of corporate profits come rolling in with the still negative economic news. Maybe no matter how bad the reports are, the buying keeps going. We shall see. Nevertheless I would be very careful buying long at current prices. Watch for the big March Chain Stores Sales Report this Thursday for the heart beat and pulse of the American consumer.

My Weekly Stock Pick

In line with the USA consumer which is a current major component of US GDP, after decades of easy money credit and fast loose buying binges, the USA has built too much of everything, including restaurants it seems. Now with consumers working hard on reducing their expenses, dining out a lot of the time is being reduced also. The fine dining restaurants have been hit the hardest, and even casual resto’s have been hit some too. Some restaurants have already gone out of business, and the rest of the smaller ones are just trying to survive. The forecast is for thousands of more restaurants to close in one or two years from now. Since 1990 restaurants and bars have grown 49 percent from 361,000 to 537,000 according to the National Restaurant Association. The US population only grew at 23% in the same period. The dining industry has been overbuilt for many years now, and it might take two or more years for it to stabilize. It looks like the saying “everyone has to eat” is not so true at all when it comes to dining out these days.

Sell Short Red Robin Gourmet Burgers. Ticker RRGB

Sell Entry: 20.52 to 19.15

Stop-Loss: 21.99

Take Profit Areas: 17.78, 16.41 to 15.04, 13.30

Red Robin Company Profile

Red Robin Gourmet Burgers, Inc., together with its subsidiaries, develops, operates, and franchises casual dining restaurants that serve gourmet burgers in the United States and Canada. As of December 28, 2008, the company operated 423 restaurants, of which 294 were company-owned, and 129 were operated under franchise agreements, including 1 restaurant that was managed by the company under a management agreement with the franchisee in 40 states and 2 Canadian provinces. The company was founded in 1969 and is headquartered in Greenwood Village, Colorado.

Click here to review and Trial the Trading Software I used in determining my short position on RRGB. Enter I2S in the "coupon code" field to receive the 5% discount.

Click the Red Robin Gourmet Burgers Stock Chart for a larger view.

Red Robin Gourmet Burgers Stock Chart