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CYCLES


Hello Ruby Tuesday

03/29/04 11:11:47 AM
by Matt Blackman

This stock has been marching steadily higher since before this bull began. It has also been showing a regular cycle for those who know what to look for.

Security:   RI
Position:   N/A

Casual dining has been a good business for the last year. Anyone who doubts it only has to look at the stock of Ruby Tuesday Inc. operator of over 440 restaurants in 26 states and the District of Columbia. For the 26 weeks ending December 2, 2003, revenues increased 14%.

Like the menu, fundamentals for this company are looking quite inviting. With a P/E of 21 and a short interest of around 3.3% of float, it qualifies as a long candidate. More impressive is its forward P/E of 19. Institutions also hold more than 87% of the stock. Notably, OppenheimerFunds just recently nearly doubled their holdings to 2.8 million shares.


Figure 1 Daily chart of Ruby Tuesday (RI) showing support by the 50-line of the Reverse Engineered RSI, ascending triangle chart pattern followed by an upside break.
Graphic provided by: MetaStock.
 
More importantly, a number of indicators are lining up to show a possible move higher. The ascending triangle that formed from December through February recently broke to the upside and the stochasticRSI indicator just generated a buy signal. The stock shows cyclical lows every four to five weeks. These have occurred in the last six months with the recent low in the last week of March. Stocks, commodities and currencies that demonstrate cyclicality are good trading candidates for those who have a trained eye and they are especially interesting when supported by other indicators.

With an election coming up, the dollar printing presses in high gear, and inflation on the rise, people go out a lot more and restaurants prosper. Ruby Tuesday looks to be in an excellent position, both fundamentally and technically, to benefit from the trend.




Matt Blackman

Matt Blackman is a full-time technical and financial writer and trader. He produces corporate and financial newsletters, and assists clients in getting published in the mainstream media. He is the host of TradeSystemGuru.com. Matt has earned the Chartered Market Technician (CMT) designation. Find out what stocks and futures Matt is watching on Twitter at www.twitter.com/RatioTrade

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