Todays Big Stock: BJ’s Restaurants, Inc. (NasdaqGS: BJRI)

BJ’s Restaurants, Inc. owns and operates 103 restaurants located in California, Texas, Arizona, Colorado, Oregon, Nevada, Florida, Ohio, Oklahoma, Kentucky, Indiana, Louisiana and Washington. BJ’s restaurants operate either as a BJ’s Restaurant & Brewery, which includes a brewery within the restaurant, a BJ’s Restaurant & Brewhouse, which receives the beer it sells from one of its breweries or an approved contract brewer of its recipe beers, or a BJ’s Pizza & Grill, which is a smaller format, full-service restaurant with a more limited menu than its other restaurants. The company’s menu features its deep-dish pizza, its own handcrafted beers, as well as a selection of appetizers, entrees, pastas, sandwiches, specialty salads and desserts, including its Pizookie dessert. Its BJ’s Restaurant & Brewery restaurants feature in-house brewing facilities where BJ’s handcrafted beers are produced for some of its restaurants.

To analyze BJ’s Restaurants’ stock for potential trading opportunities, please take a look at the 1-year chart of BJRI (BJ’s Restaurants, Inc) below with my added notations:

As with yesterday’s SFLY, BJRI could be in the process of forming a common chart pattern known as a Rectangle. The pattern is being formed with the combination of the $40 support (green) and the $45 resistance (red). The $50 level was also important as support in May, June and July. If this pattern is in fact forming, the same declining volume that SFLY had is also in place with BJRI. Some traders will watch this pattern to see which way the stock breaks, either through the $45 resistance or below the $40 support, before entering a trade. More active traders could look at additional trading opportunities at $45 or on another pullback to $40.

The Tale of the Tape: Whether or not a potential Rectangle pattern is being formed, BJRI is trading within the range of two important price levels at $40 and $45. Long trades could be made if BJRI breaks through the $45 resistance or pulls back to the $40 support with a stop placed below the level of entry. Or, short plays could be made on a rise to $45 or on a break below $40 with a stop placed above whichever level is entered. If BJRI were to break below $40, the next level down for a long trade would be at $35 (blue).

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!
Christian Tharp, CMT