NEW BULLISH Plays
Brinker Intl. Inc. - EAT - close: 45.54 change: +1.14
Stop Loss: 43.75
Current Gain/Loss: unopened
Entry on November -- at $--.--
Listed on November 05, 2013
Time Frame: 6 to 8 weeks
Average Daily Volume = 1.4 million
New Positions: Yes, see below
Why We Like It:
EAT is in the services sector. They are best known for their Chilis Grill & Bar and Maggianos Little Italy branded restaurants with almost 1,600 combined locations. The company reported earnings on October 23rd. The results were disappointing. EAT missed the bottom line estimate by two cents and missed the revenue number. Management's guidance was pretty lackluster as well.
The only saving grace seemed to be that EAT's properties are outperforming the competition in the casual dining space. It is worth noting that the restaurant names in general should benefit from the falling price of gasoline in the U.S. AAA says that the average price of gas in the U.S. is now under $3.00 a gallon. Falling fuel prices mean more disposable money for going out to eat.
The stock initially sold off following its earnings results but traders bought the dip. Since then EAT has seen a dramatic rally higher and a breakout past resistance near $44.00. The $44 level has now formed new short-term support and EAT was showing relative strength today with a +2.5% gain and a new all-time, record high.
The latest data listed short interest at 10% of the 65.5 million share float. If this rally continues it could spark some short covering. Today's high was $45.62. I am suggesting a trigger to open bullish positions at $45.75. If triggered our target is $49.75. More aggressive traders could aim higher. The Point & Figure chart for EAT is bullish with a $67.50 target.
I want to urge a little caution if you plan to use the call options. EAT's January options have some relatively wide spreads. The 2014 January $45s seem to be the exception for now but that doesn't mean the spread will stay this narrow (it could get worse).
Trigger @ 45.75
Suggested Position: buy EAT stock @ (trigger)
- (or for more adventurous traders, try this option) -
buy the 2014 Jan $45 call (EAT1418a45) current ask $1.50