Cracker Barrel Old Country Store, Inc. (CBRL) is a combination country restaurant and gift shop with a southern comfort feeling that is found at many major intersections along the Interstate Highway System in the Southeast and the Midwest.
The stock closed last week at $164.29, up 4.5% year to date and up 11.1% from its 2019 low of $147.90 set on April 9. The stock is 9.7% below its all-time intraday high of $181.89 set on Nov. 29. The stock is reasonably priced with a P/E ratio of 18.50 with a dividend of 3.21%, according to Macrotrends.
Analysts expect Cracker Barrel to post earnings per share (EPS) of $2.43 to $2.49 when it reports results before the opening bell on Tuesday, Sept. 17. The stronger U.S. economy has more drivers on the road, and it seems that the company's parking lots are nearly filled. The company has beaten EPS estimates in three consecutive quarters, and same-store sales should remain solid. On the other side of the coin, foot traffic may be down slightly, and increasing wages and rising costs of goods sold could pinch margins.
The daily chart for Cracker Barrel
The daily chart for Cracker Barrel shows a trading range between the Nov. 29 all-time intraday high at $181.89 down to its 2019 low of $147.90 set on April 9. This is an 18.6% correction, which is consolidating today. In a trading range environment, I do not look for "golden cross" or "death cross" formations.
The annual risky level is above the chart at $188.48. The third quarter value level is $153.34, with its risky level for September at $170.68 and semiannual risky level for the second half of 2019 at $172.80.
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 $165.88. The stock is above its 200-week simple moving average, or "reversion to the mean," at $150.44. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week declining to 38.04, down from 42.04 on Sept. 13.
Trading strategy: Buy Cracker Barrel shares on weakness to the quarterly value level at $153.34 and to the "reversion to the mean" at $150.44. Reduce holdings on strength to the monthly and semiannual risky levels at $170.68 and $172.80, respectively.
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 annual level remains in play. The weekly level changes each week. The monthly level changes at the end of each month, most recently on Aug. 30. The quarterly level was changed at the end of June.
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.
How to use 12 x 3 x 3 weekly slow stochastic readings: My choice of using 12 x 3 x 3 weekly slow stochastic readings was based upon backtesting many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.
The stochastic reading covers the last 12 weeks of highs, lows, and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading, and I found that the slow reading worked the best.
The stochastic reading scales between 00.00 and 100.00, with readings above 80.00 considered overbought and readings below 20.00 considered oversold. Recently, I noted that stocks tend to peak and decline 10% to 20% and more shortly after a reading rises above 90.00, so I call that an "inflating parabolic bubble," as a bubble always pops. I also refer to a reading below 10.00 as "too cheap to ignore."
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.