Paper trade: CBRL breakout before earnings

Based on my previous post about finding stocks in play, I’ve identified Cracker Barrel Old Country Store, Inc. (CBRL) as a candidate of an in-play stock. CBRL will release their earnings on Sept 15th before the market opens. So there’s only Monday before the earnings and then perhaps a few days after to play this stock.

The price I am watching is $32.10 based on Figure 1. This is a breakout setup to the long side. What caught my attention is the recent gap up breaking a long term trendline resistance with only moderate volume. And then the lack of a retracement with little volume on the down days (Figure 2).

Stop Entry: $32.10

Stop: $31.40

Target: $35. Based on the projecting from breaking the wedge formation of Figure 1. The wedge’s height is about $2.50. So if CBRL breaks out of $32. The target is $34.50. But the round number resistance is so close at $35, so it’s likely that the push will reach that level.

Reward / Risk: 2.9 / 0.7 = 4.1 < 5.

Update: CBRL touched $35 on September 16, just two days after breaking my stop entry of $32.10. This was a good trade.

Cracker Barrel Old Country Store, Inc. (CBRL)

Cracker Barrel Old Country Store, Inc. (CBRL)