Wendy’s(WEN) Could Be Ready To Cook Up New Highs

Posted by barkand on July 23, 2011 under Bollinger bands, Support / Resistance | Be the First to Comment

Wendy’s (officially known as Wendy’s/Arby’s Group) may be in the fast food business, but shareholders have been waiting a long time for sustenance. After the Autumn 2008 lows, the stock has made repeated moves toward $5.50 only to run out of energy. The result of all this back-and-forth action is a lid on prices around $5.50 – 5.60 and a rising support line now sitting at $4.70.

The shares have been resting just below the $5.50 area for a couple weeks now and could be poised to finally break through long-term resistance. Notice how volume has consistently been stronger in up weeks than in down weeks throughout 2011. A good sign of accumulation. We would view a weekly close decisively above $5.60 as very bullish. Such a move, if it happens, would almost certainly be accompanied by heavy volume.

Another interesting aspect of this chart is a variation of a Bollinger band “squeeze”. Back in May the weekly band width became more narrow than it had been in a long, long time. Prices then went the “wrong” way, touched the long-term trend line, then sprung back in the opposite direction. Of course, the same conditions were present several months earlier and nothing happened.