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Fan Yang

Wendy's (WEN) Retreats After Rolling Out Breakfast Menu

Wendy's $WEN has been bullish in August, but is paring those gains in a hurry. This decline followed news that the fast-food chain will be rolling out a breakfast menu in 2020. Here's an overview from businessinsider.com:

  • Wendy's shares tanked after the restaurant chain announced it will invest $20 million to expand its breakfast line across all US locations.
  • The company's announcement led it to lower profit expectations for 2019. Wendy's now expects adjusted earnings per share to drop by 3.5% to 6.5%, after previously forecasting growth between 3.5% and 7%.
  • The chain expects to hire about 20,000 new employees as part of the expansion.

In my opinion, the current pullback could be a good opportunity to buy-on-the dip.

WEN Daily Chart

(click to enlarge)

Pullback:
- The reaction during the 9/10 session was sharp, accompanied by very strong volume.
- I think this is going to initiate a period of consolidation.
- I would not be surprised if this pullback extends longer towards $18. 
- But I think the $18-$18.50 area, which was a previous resistance, will become support.
-  I already opened up a small position at $20, but have dry powder for $18.25. 
- We will probably see a period of consolidation before WEN gets back into a bullish trend, so I don't think we have to rush. But I wanted to make sure to get some exposure just in case the market does open up a V-shape bullish reversal after this current flush-out of weak hands.
- Also, even within a period of consolidation, I think there could be upside towards $22. 

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