Cava made a big splash with its offering in the fast-casual restaurant business. It's often referred to as the Mediterranean counterpart to Chipotle Mexican Grill. While we had a previous trade in August that we tried to hold for a bigger move, we went back to our swing trading roots for the most recent trade. That got us a similar profit in a fraction of the time.
Early Entry Starts On The Right Foot
One of the more attractive parts about swing trading is a focus on early entries. After plunging through its 50-day moving average line (1), Cava was avoided while it went through its basing structure. But as it bounced more than 15% from its bottom (2), it became more attractive.
Even better, it consolidated those gains in nice tight action over the next few days before popping back above its 50-day line on heavier volume than average (3). That earned it a spot on SwingTrader.
At the time of our entry at 131, Cava was already up 4% for the day. By the close it was up 7.5% and we already had a healthy gain from our entry. Plus, Cava had the added benefit of being outside the AI space. Earlier that week, DeepSeek put enormous pressure on AI stocks and broke a number of charts.
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Though the market looked like it was on the road to recovery, a downside reversal in the market and many stocks led us to lock in some profits early on the position (4).
While Cava went much higher after that, first it went much lower on a big shakeout (5). With our position chopped in half, it was much easier to survive the move below our entry having already locked in some healthy profits.
In the first few minutes after the open on Feb. 3, we set alerts at the lows of the day on a number of positions. Cava never breached it and by the market close it was up over 1.5%. We started adding back shares that we cut on the reversal. Sure they were at a higher price than our sells, but less than half a percent.
Keeping Cava Trade Fast And Casual
The next day (6) we increased the position even more as it followed up on the reversal day. We brought it just over our regular 10% size for a full position. Our early entry and profit cushion could give us extra flexibility in holding what could be a big winner. But we soon realized it wasn't the right market environment for that.
On Feb. 7, market indexes saw their third downside reversal on a Friday (7). While Cava held up better than many stocks we didn't want to overstay our welcome. We started reducing a few hours into the market session and within two hours we were out of the position completely.
Locking in profits quickly saved us from an even more punishing drop a few days later (8). We got the most out of the trade with our early entry and profit taking. Now that it's getting support at its 50-day line, we might have another shot at it in the future.
More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on X, formerly known as Twitter, at @IBD_JNielsen.
