Quality Might Be Wendy's Recipe, but the Stock Charts Say Otherwise

Let's check out a fast food company that operates both franchise and company-owned restaurants, which began in 1969 when Dave Thomas opened his very first restaurant in Columbus, Ohio. I'm speaking of course about Wendy's WEN, an iconic chain that became known for its square beef patties, made from fresh beef, and Frosty desserts. The company went public in 1976.

Let's get an update from the charts and indicators.

In this daily bar chart of WEN below, I can see that prices have worked lower over the past 12 months. WEN trades below the declining 50-day moving average line and below the bearish 200-day moving average line. The weekly trading volume has increased in the past five weeks or so as traders are voting with their feet. The On-Balance-Volume (OBV) line is in a downward trend as sellers of WEN have been more aggressive than buyers. The Moving Average Convergence Divergence (MACD) oscillator is in a bearish alignment below the zero line.

In this weekly Japanese candlestick chart of WEN below, I can see a bearish setup. Prices trade below the negatively-sloped 40-week moving average line. The weekly OBV line has moved to a new low for its move down and could be foreshadowing lower stock prices ahead. The MACD oscillator has been bearish since July.

In this daily Point and Figure chart of WEN below, I can see a downside price target in the $14.50 area. A trade at $14.50 could precipitate further declines.

In this second Point and Figure chart of WEN below, I used weekly price data with a five-box reversal filter. Here, the software suggests a price target in the $9.41 area.

Bottom line strategy: Wendy's has a motto that "quality is their recipe" but the charts could use more aggressive buying than quality. I have no idea if WEN will lower the prices of their sandwiches, but their stock price looks like it will head lower in the weeks ahead.

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