Cheesecake Factory (CAKE) Technically Sound


Cheesecake Factory Inc. (Nasdaq: CAKE) operates about 160 full-service dining restaurants.  The company’s extremely large menus…around 200 items…are enjoyed by just about everyone, and the stock price is proof of that.  The company’s focus on high quality at affordable prices continues to be a welcome relief for its clients and coupled with great management execution continues to make this company a success story.   Important to note is that the company is due to announce its second quarter earnings on July 20 (today) after the close of regular trading hours.

If we look at five year weekly chart note the steep but orderly incline over the past two years.  In June the stock tested the lower up-trend line (which coincided with the 200 day simple moving average) and is now attacking the highs from December 2010.


On the daily chart looking back to August 2010 we see the stochastics have come out of overbought territory and hence possibly giving the stock more room to run higher.  Additionally, the volume has picked up recently, another positive sign on the margin.


And that brings us to the close-up look at Cheesecake Factory Inc. (Nasdaq: CAKE).  The daily chart dating back to December 2010 shows the stock breaking out of resistance on July 1st and after consolidating for two weeks yesterday again tried to rally and take out the high on July 7th.  Although the highs from December 2010 have not yet been surmounted on a closing basis, the more important date to focus on is July 20th (today) when the company is due to announce its earnings.  I do not buy stock ahead and into earnings announcements so I do not want to advocate that here.  But barring any major disaster of an earnings announcement the stock should have further upside over coming months and hence a profit target around $38 is feasible.  Admittedly, much hinges on the earnings announcement, but the charts look solid and should have higher to go.

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