Investors Feasting on Restaurant Stocks

By Joey Fundora | June 29, 2011 AAA

With the markets attempting to bottom out, it's interesting to see which groups are taking the lead on the rebound. While the majority of stocks are groping for a bottom along with the indexes, some groups are sprinting to not only new yearly highs, but also all-time highs. This is a great show of relative strength, and is a sign of institutional sponsorship.
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One of the groups with good representation in this list of stocks making all-time highs is the restaurant stock sector. Americans love to eat out, and apparently it doesn't matter whether the economy is soft or not. Beyond the risk of a weak economy, these stocks have been able to shake off increased health consciousness by the general public by either catering to them with "healthy options," or simply catering to "larger is better" motto that we American's love.

Certainly no stranger to playing on gluttonous themes, Yum! Brands, Inc. (NYSE:YUM), parent company to Pizza Hut, Taco Bell and Kentucky Fried Chicken, among other well known brands, is trading just shy of its all-time high near $57. It cleared an important resistance level around $52 in late April on a high volume gap. After a quick retest, YUM rallied to its all-time high a few weeks later. YUM has been following channels on both the upward rally, and the subsequent consolidation the past few weeks. Traders should watch the $56 level to see if YUM is ready to resume its uptrend. (For more, see the Most Commonly Use Forex Chart Patterns.)

Despite the threat of a lockout in the NFL this year, Buffalo Wild Wings, Inc. (Nasdaq:BWLD) continues to push to new highs. BWLD is already extended after rallying over 10 points in the past couple of weeks. However, it is acting very strongly and has to be considered a market leader after its yearly performance. While some consolidation is to be expected, trader should keep a close eye on prior resistance near $63.50 as a possible area for support moving forward. (For related reading, see Gauging Support And Resistance With Price By Volume.)

McDonald's Corporation (NYSE:MCD) is another stock in this sector pushing to new all-time highs. MCD looked to be in trouble late last year and through the early part of this year. It slipped under its 50-day moving average and threatened the 200-day moving average on a couple of occasions. However, it began a steady climb to new highs in March, ultimately reaching $83 in May. MCD had been trading sideways while the markets weakened until exploding yesterday to new all-time highs. MCD may also be extended depending on your time frame, but the trend certainly seems higher for this stock. (For more, see Moving Average Strategies.)

Humongous burrito maker, Chipotle Mexican Grill, Inc. (NYSE:CMG) is also trading at all-time highs. CMG has been difficult to ascertain the past few months, but it has been steadily grinding higher since clearing a resistance level near $260 in February. It is following a channel as it rises and is currently near the top of the established range. Traders should likely not chase it at these levels, but CMG could present a good opportunity on a light volume pullback towards the $280 level.

The Bottom Line
It's still too early to know if the current bottoming attempt in the markets will amount to anything or not. However, when several stocks in the same group are pushing to new all-time highs, it behooves a trader to take notice. The restaurant stocks were one of the strongest groups over the past year and are showing great relative strength right now. If the markets continue to show some strength, then this group will likely continue to push to new highs.

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At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article

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