Out of its compressed price base below on the daily timeframe, Papa John’s is likely setting up for an enticing trade. The issue is whether the stock merely gets pleasantly buzzed for a nice breakout higher, or becomes sloppily drunk and breaks down.
Given the overall action in consumer discretionary stocks of late, especially the casual dining space, the knee-jerk reaction is to presume this consolidation must resolve higher. But there is also the distinct possibility now of a Netflix-like base breakdown, given the underlying weakness and divergences we are seeing in many corners of the market, masked by the Dow and S&P probing all-time highs.
The stock closed today essentially right on support dating back several weeks. Thus, on any further weakness I like the stock as a short idea, targeting the 50-day moving average below (blue line). If, on the other hand, it can regroup, I like the stock for a long with a trigger of $61.62, playing a continued breakout higher.
Earnings are not scheduled until much later this month, and the stock is not heavily-shorted.
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My gut tells me to short. However, it is also a great looking bear trap. No action again I guess.
Papa looks drunker than a Hoot Owl.
I had Papa Johns for dinner. Never disappoints.
The stock I can’t comment on.