Run Up The Credit!

As Jerimiah Babe said yesterday:

“People are fighting this collapse, they are fighting this depression … They don’t want to give in.”

One way that ‘fighting’ appears to be showing up, is restaurant dining; a completely discretionary activity.

Unlike the bearish set-ups with CarMax (KMX) and Carvana (CVNA), at some point, people still need a car.

However, they don’t ‘need’ a restaurant.

Implosion Then, Collapse Now?

We can see the ‘discretionary’ result from the implosion of Darden Restaurants (DRI), during the melt-down of 2020.

Darden dropped from 124.01 to 26.15, that’s nearly – 79%, in just five weeks.

The stock recovered and went on to new highs … but recently, there’s been trouble in River City. 🙂

As we’ll see below, DRI looks to have started its initial leg down and is now in a retrace correction (not advice, not a recommendation).

Darden Restaurants DRI, Weekly

It was fourteen-weeks above resistance, before breaking lower, we’ll call that breakdown significant.

Underside resistance (if tested) could provide stiff opposition for any move higher.

Pressured Into The Holidays

It just so happens, DRI is scheduled to report earnings on December 15th.

Whether or not the ‘depression fighting’ consumers will have exhausted themselves by that time, is unknown.

However, we can state with some confidence, there’ll be pressure to keep up appearances (spending) until the very last minute.

By that time, price action in DRI may be testing the underside of resistance in the 155 – 160, area (not advice, not a recommendation).

Stay Tuned

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