Cracker Barrel Old Country Store, Inc. (CBRL) is a combination restaurant and gift shop with a southern comfort focus that can be found at many major intersections along the Eisenhower Interstate Highway System. The stock closed May at $157.09, down 1.7% year to date and 10.9% above its 52-week low of $141.63 set on Sept. 18. The stock is also in correction territory at 15.5% below its all-time intraday high of $186.00 set on Nov. 29.
Analysts expect Cracker Barrel to post earnings per share of $2.05 when it reports earnings before the opening bell on Tuesday, June 4. The stock has a market-neutral P/E ratio of 18.06 and a favorable dividend yield of 3.18%, according to Macrotrends. The stronger economy likely has more drivers on the road, and it seems to me that the parking lots are almost always full. This suggests that same-store sales should be solid. Recent changes to its menu and new store openings are also positives. On the other side of the coin, increased wages and rising costs of goods sold should pinch margins.
The daily chart for Cracker Barrel
The daily chart for Cracker Barrel shows the 15.5% correction from its Nov. 29 high of $186.00 and its rebound of 10.9% from its Sept. 18 low of $141.63. The close of $159.86 on Dec. 31 was an important input to my proprietary analytics, and its semiannual and annual risky levels are $173.58 and $191.70, respectively. The March 29 close of $161.61 was an input to my analytics, and its quarterly pivot at $159.16 has been the pre-earnings pivot or magnet. The close of $157.09 on May 31 was the input that resulted in its monthly risky level for June at $168.33.
The weekly chart for Cracker Barrel
The weekly chart for Cracker Barrel is negative, with the stock below its five-week modified moving average of $162.19. The stock is above its 200-week simple moving average, or "reversion to the mean," at $150.28. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week declining to 56.84, down from 62.35 on May 31.
Trading strategy: Buy Cracker Barrel shares on weakness to the 200-day simple moving average at $150.28 and reduce holdings on strength to its monthly and semiannual risky levels at $168.33 and $173.58, respectively. Its quarterly pivot remains at $159.16 as a magnet.
How to use my value levels and risky levels: Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual, and annual closes. The first set of levels was based upon the closes on Dec. 31. The original semiannual and annual levels remain in play. The weekly level changes each week; the monthly level was changed at the end of each month. The close on May 31 established the monthly risky level for June. The quarterly level was changed at the end of March.
My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.