Just a little less than a month ago I posted a bullish outlook on Buffalo Wild Wings (NASDAQ:BWLD). It was mostly a technical-based call; I liked the way BWLD had moved back above a couple of key moving average lines as a result of a prolonged rally effort.
Well, never let it be said I don't follow-up on the seeds I plant. I want to follow-up on the BWLD suggestion today. The only thing is, I want to reverse my call.
Don't get the wrong idea.... you would have actually made money had you stepped into Buffalo Wild Wings on my suggestion from March 4th. In fact, you would have made about 9.6% in less than a month, as shares have rallied from $81.21 then to $89.00 now. No, it's not a ton of money, but it's not bad for a month's worth of work.
But why the change of heart? Because we're seeing tell-tale signs that the rally is winding down, at least in the near-term.
For starters, the shape of today's BWLD bar speaks volumes. We saw a bullish open, and a bullish move up a new multi-week high. But, it only took about an hour for the stock to roll over and start making lows for the day... lows well under the open. This may well be hint that the undertow has switched from a net-bullish to net-bearish environment.
It's not just the shape of the bar today that suggests Buffalo Wild Wings has reached a short-term peak though. The spot where the rollover occurred is also lined up with the last major peak, at $90.00. That's where BWLD topped out in October, and it's close to the ceiling that was in place for most of Q2-2012. Clearly there's something big about that line in the sand, even of only for psychological reasons. (Big round numbers like 90.00 can also be key lines for traders.)
All that being said, it's not like the chart is the only thing working against the stock right now.
While Buffalo Wild Wings has been the subject of a lot of positive attention of late, including an upgrade from Feltl and the assumption that March Madness means more sales of chicken wings (which is probably true). This quarter's sales are being compared to the year-ago figure though, which also included March Madness; the bar is still set pretty high. Throw in the fact that BWLD is still trading at a little more than 20 times its forward-looking earnings, and it's not like there's any upside left to tap into... at least not for the rest of the quarter.
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