Range Tightening in Cheesecake Factory

Published on Sunday, 11 December 2011 11:08 Written by Christopher Lynn

New York, December 11th (TradersHuddle.com) - Shares of The Cheesecake Factory Incorporated (NASDAQ:CAKE) closed the trading session at $28.28 placing the price action in a very tight range, given that calculated support is set at $27.84 and the calculated resistance based on an algorithm of peaks and troughs is set at $29.49

The Cheesecake Factory Incorporated (NASDAQ:CAKE) operates casual dining restaurants under the name The Cheesecake Factory, Grand Lux Cafe, and RockSugar Pan Asian Kitchen. Its restaurants offer appetizers, sandwiches, pasta, various meats, and varieties of cheesecake. The Cheesecake Factory operates in the United States.

Cheesecake Factory's stock price action indicates that both sellers and buyers are materializing very close to each other, which is indicative to a momentum building area, as the stock can resolve by breaking out of the tight range that developed.

Traders wanting to establish a position should place close attention to Cheesecake Factory's price action, as any movement outside its predefined range of $27.84 and $29.49 could grab the attention of momentum buyers, looking for a big movement in the price of the stock. Traders need to be aware that tight range resolution works both ways, hence, a move below support at $27.84 could spark above average selling. A tiered approach can be a good way to approach starting a position in Cheesecake Factory's, by establishing a starter position while the stock is in the tight range, and then adding to the position as it breaks and closes above resistance.