The Chart du Jour

Non-Fast Food Summer

May 18, 2001

By, Barclay T. Leib


Chart produced using Advanced GET End-of-Day

Now let's get this straight: There is a beef crisis in Europe. There is a growing health consciousness about cutting down on greasy fast food in the U.S. The summer promises high gas prices, keeping people closer to home. And somehow Wendy's is trading just $2 off its 52-week high?

In the chart above we have stretched our Fibonacci bands just a bit further than the March 2000 low in Wendy's at $14. We think our bands "fit" the recent price action better from an extrapolated low near 12 7/8. In addition, there is at least a potential here, particularly with diminishing volume of late, of a huge Head-and-Shoulders top.

Wendy's may offer food in overall quality that is a touch above similar fare at McDonald's and Burger King, but remember this: All it would take is one major outbreak of e-coli poisoning this summer courtesy of a Wendy's burger, and WEN would inevitably get clocked.

Short positions set around $25, with a 12 7/8 target, and stop-losses set above $31.50, would be risking $6.5 to potentially make $12. At least consider that, and then go make yourself a nice healthy salad.


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