Darden Restaurants: This Is What a Strong Signal Looks Like

Core Thesis - Darden Restaurants (NYSE: DRI) stock shows potential for a trend-following entry after a significant pullback in 2025, with a credible path to market-beating returns in 2026 if resistance is cleared [1] Price Action and Trends - DRI stock has been in an uptrend since 2014, with the only significant disruption being the volatility caused by COVID-19 [2] - Recent activity indicates a strong uptrend in 2024, breaking out of an Ascending Triangle Pattern and reaching a new all-time high, driven by growth, margin strength, and capital returns [3] - The stock experienced a 25% decline from its peak to the November 2025 low, but the long-term uptrend remains intact [4] Technical Indicators - The recent pullback allowed momentum indicators like MACD and stochastic to reset, indicating potential for further upward movement [5] - The 150-week EMA, a critical long-term support indicator, is advancing and aligns with the DRI uptrend, setting the stage for a rebound [5] - Technical indicators suggest a trend-following entry, with bullish crossovers in stochastic and MACD indicating an uptrending market that could retest current highs in 2026 [7] Key Resistance Levels - The stock must reclaim the 150-day EMA to confirm accumulation, as many investors view this line as a proxy for intermediate-term accumulation [8] - A successful push above the 150-day EMA, followed by a retest, would provide confirmation for traders seeking more than an initial bounce [9] Earnings Performance - Darden's fiscal Q2 results showed over 7% year-over-year growth, substantial margins, and healthy cash flow, including a 3.1% yielding dividend and share buybacks [10] - The FQ2 release led to price target increases and upgrades, affirming a Moderate Buy rating with a 20% upside forecast, driven by aggressive institutional buying [11] - Institutions own over 90% of the stock, with a notable purchasing activity of $2 for every $1 sold in 2025, indicating limited downside and ample upside potential for DRI [12]