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Great Setup Emerges in Cracker Barrel Stock After Earnings Pullback

The Street logo The Street 9/17/2019 Bret Kenwell
a sign on the side of a building: Great Setup Emerges in Cracker Barrel Stock After Earnings Pullback© TheStreet Great Setup Emerges in Cracker Barrel Stock After Earnings Pullback

Shares of Cracker Barrel are up 1% to $166.53 in midday trading, but are well off session highs.

The stock opened north of $171 and quickly rallied to a high of $174.85 before retreating to the mid-$160s. The move comes after the company reported fiscal fourth-quarter earnings.

Cracker Barrel reported earnings of $2.70 per share, besting expectations by 20 cents. Revenue of $787.1 million sank 2.9% year-over-year, but beat analysts' estimates by $5.2 million.

As for guidance, management expects revenue for fiscal 2020 to come in between $3.15 billion and $3.2 billion. That's ahead of consensus expectations, which stand at $3.14 billion. Management expects adjusted 2020 earnings to come in between $9.30 and $9.45 per share, again topping consensus expectations of $9.20 per share.

It's discouraging for investors to see such a pedestrian response in the share price given that management delivered a top- and bottom-line beat in the quarter and above-consensus guidance for both full-year earnings and revenue.

Despite investor disappointment, though, let's see if we can pinpoint some key levels on the chart to help find opportunities.

Trading Cracker Barrel Stock

a close up of a map: Daily chart of Cracker Barrel stock.© Provided by TheStreet Inc Daily chart of Cracker Barrel stock.

Cracker Barrel stock rallied right up to the 23.6% retracement and quickly recoiled from this level. Despite the volatile post-earnings action, the roadmap is actually quite clear from here.

CBRL stock tested and held the 200-day moving average. Aggressive longs can consider a position in the stock with a close below Tuesday's lows as a possible stop-out. However, I'd rather see the action play out a bit more in Cracker Barrel stock.

Specifically, if the bulls are to make a charge, they will need to reclaim the 50-day moving average at $168. That will also put the stock over the 38.2% retracement. If the stock can do that, investors can look for a rally back up to the 23.6% retracement and strong resistance near $177.

Should the 200-day moving average ultimately fail as support -- either in the short term or if Cracker Barrel fails to reclaim the 50-day and begins to retreat -- I want to see a test of the $162.50 area. There, CBRL stock will find the 50% retracement, as well as an uptrend support mark (blue line) that's been in place since fourth quarter 2018 lows.

Either way, traders will have their answers soon enough. Either the 200-day holds as support and Cracker Barrel reclaims the 50-day, or it fails and we get a buy-the-dip scenario into a solid risk/reward area.

This article was originally published by TheStreet.

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