With a market cap of just over $9B, Brinker International is the owner of Chili’s Grill & Bar and Maggiano’s Little Italy restaurant brands. The stock’s run since the pandemic has been nothing short of phenomenal. Currently hovering near $220 per share, it is up more than 30-fold from the bottom in March, 2020. That surge didn’t happen in isolation, of course. Sales, profits and cash flows have been growing alongside the share price, fundamentally justifying its ascent.
That being said, trees don’t grow to the sky and extrapolating the recent past into the future can be dangerous in the field of investing. After all, Brinker stock went practically nowhere between 2007 and 2023, so the company is not a stranger to stagnation. The question is, could a similar threat be lurking in the near future? The bulls won’t like the answer the Elliott Wave chart below is giving.
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The weekly chart of Brinker Int’l stock shows that the post-2020 uptrend has drawn a textbook five-wave impulse. We’ve marked the pattern (1)-(2)-(3)-(4)-(5), where the impulsive structures of waves (3) and (5) are also visible and labeled 1-2-3-4-5. If this count is correct, wave 5 of (5) can make one last new high before the entire pattern is complete. The problem is that according to the theory, a three-wave correction follows every impulse, usually erasing most or all of the fifth wave. In Brinker’s case, this would translate into a decline back to the support near $125 a share. Assuming a bearish reversal around $280, we’re talking about a more than 50% sell-off, before the bulls get a chance to return.
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