After doubling over a three-year period from mid-2012 to mid-2015, Cheesecake Factory Inc (NASDAQ: CAKE) stock has floundered in the past year or so. In fact, after hitting a new all-time high of $58.15 in August, the stock is down more than 10% in roughly eight months since.
Fortunately for Cheesecake Factory bulls, the stock has spent the last several months producing one of the most bullish classic technical chart formations.
THE CUP & HANDLE
A cup and handle pattern is formed when a stock takes a pause to consolidate during a long-term uptrend before ultimately resuming the uptrend. First, the slow, rounded price dip and recovery firms the “cup” part of the pattern. Then, a relatively brief and shallow dip or sideways trading period forms the “handle” before the stock rockets to new highs.
First take a look at what a textbook cup & handle pattern should look like:
Now take a look at how Cheesecake Factory has been trading since October:
The pattern seems to be very clear at this point, which is good news for patient Cheesecake Factory shareholders.
For now, the critical support level to watch is…
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