For investors who use technical analysis, finding stocks that are in a solid trend and ready to advance further is a main goal. One organized way to do this is with a Technical Breakout screen, which looks for stocks showing good technical condition while also building a consolidation pattern. This method tries to answer two important questions: which stocks are in a clear uptrend, and when is a good, lower-risk moment to join that trend? The screen usually uses specific measures like ChartMill's Technical Rating to judge trend strength and a Setup Quality Rating to find promising price bases. A stock on this list means it has met strict numerical tests for momentum and pattern, possibly preparing for a notable price change.
Brinker International Inc (NYSE:EAT), the parent company of Chili's Grill & Bar and Maggiano's Little Italy, has recently appeared as a notable candidate from this kind of technical breakout search. According to the latest ChartMill Technical Analysis report, EAT shows a strong mix of good trend behavior and a high-quality setup, making it a stock of note for investors focused on technicals.
A Base of Technical Health
The main step in a breakout plan is to confirm the stock is in a clear, good uptrend, which is what the Technical Rating measures. A high number shows better relative performance, good alignment of important moving averages, and a steady trend over different time periods. EAT does very well in this basic area, with a Technical Rating of 9 out of 10.
The report lists several points that support this high rating:
- Trend Alignment: Both the short-term and long-term trends for EAT are positive, a united bullish sign that implies momentum is more than temporary.
- Moving Average Support: The stock price is above all its main simple moving averages (20, 50, 100, and 200-day), and these averages are each rising. This layered support is a typical sign of a solid uptrend.
- Market Position: In the Hotels, Restaurants & Leisure industry, EAT is performing better than 90% of its 132 competitors, showing clear relative strength.
This sound technical foundation is important because it raises the chance that a breakout from a consolidation will follow the existing trend, instead of stalling or turning down.
A High-Quality Setup for a Possible Breakout
While a solid trend is needed, it is not enough for a good trade. Buying a stock that has already risen a lot involves more risk. The Setup Quality Rating deals with this by finding times of price consolidation or "tight" trading, which frequently come before the next price jump. EAT's Setup Rating is also a 9, meaning a very good pattern is present.
The technical report notes the features that lead to this high setup score:
- Consolidation within a Range: In the last month, EAT has moved between about $146.53 and $168.48. It is now in the middle of this range, with recent price movement showing consolidation and less volatility, a common condition before a breakout.
- Clear Support and Resistance: The analysis marks a defined support area between $156.63 and $160.16, made by a combination of trendlines and moving averages. Slightly above the current price is a resistance area between $165.89 and $167.70. These clear levels give specific points for trade planning.
- Large Trader Activity: The report points to more activity from big traders in recent days, measured by volume study, which can be a supporting sign of buying before a move.
This high-quality setup is what changes a strong stock into a possible trade chance. It gives a reasonable place for an entry point (a breakout above resistance) and a reasonable place for risk control (a stop loss below support).
Trade Plan and Market Setting
The automatic analysis from these ratings suggests a specific, though example-only, trading plan. It offers an entry on a buy-stop order at $167.71, just above the marked resistance area, with a stop-loss order at $156.62, just below the main support. This would mean a planned risk of about 6.6% on the trade.
It is important to see that EAT's activity differs from the wider market. While the S&P 500's trends are now neutral and the index is in the lower part of its yearly range, EAT is in the middle of its own 52-week range, showing clear independence and strength.
Finding More Breakout Chances
EAT shows the kind of chance a careful, technical screening process tries to find. For investors wanting to see a new list of stocks that fit similar conditions of solid trends and high-quality setups, new choices are found each day. You can see the current results of the Technical Breakout Setups screen through this link: View Today's Technical Breakout Setups.
Disclaimer: This article is for information only and is not investment advice, a suggestion, or an offer or request to buy or sell any securities. The trading plan mentioned is an automatically created example to illustrate and is not a suggestion. All investing and trading has risk, including the possible loss of your investment. Always do your own research, think about your personal money situation and risk comfort, and talk to a qualified financial advisor before any investment choices. Past results do not guarantee future outcomes.
