Restaurant Industry Seeing Strong Earnings - Growth Potential

Many restaurant chains are scheduled to report earnings this week and the ones that have reported already have been promising. I particularly think that P.F. Changs (PFCB) and Wendy's (WEN) have set up well here.

P.F. Changs, for those of you have never been or heard of, owns and operates two restaurant concepts in the Asian niche. P.F. Chang's China Bistro features a blend of high-quality, traditional Chinese cuisine and American hospitality in a sophisticated, contemporary bistro setting. Pei Wei Asian Diner offers a modest menu of freshly prepared Asian cuisine in a relaxed, warm environment offering attentive counter service and take-out flexibility. The company currently owns and operates 131 P.F. Chang's and 77 Pei Wei Asian Diner restaurants.

One thing that I would like to point out about the PF Chang chart is that the price is approaching the 200-Day Moving Average today. This should serve as a point of resistance as demonstrated several times in prior months. At the same time, I have drawn a line to show you the turn to an intermediate term rally here. As these two lines come closer together in coming weeks the price of the stock is going to get "pinched" and one of two things is going to happen.

1.) The stock breaks the 200 MA and continues it's bullish run.
2.) The 200 MA flattens and a new base is formed.

This represents a positive risk scenario at this time. Look for the stock to pull back slightly after bouncing off its 200 MA and set up a good opportunity to enter at a cheaper price. Should the intermediate term rally break the 200 MA then you should see a significant upside to follow. If not, then the stock's new base will form and trade in that range for a while. You can then wait it out to see the next move or go on looking for other opportunities.

These other opportunities in the same sector come in the form of Wendy's. Wendy's has also pulled back recently and seems set for a nice bounce back, at least for the short term.

The 50-Day moving average should provide some support here thus making now a good entry point. The MACD, FULL STO and RSI also look promising for WEN here.