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Darden Restaurants, Inc.: This is What a Strong Signal Looks Like
Written by Thomas Hughes. Article Published: 12/23/2025.
Summary
- Darden Restaurants is testing long-term trend support after a steep pullback, creating a potential trend-following entry setup.
- Recent quarterly results showed solid sales and same-restaurant sales growth, alongside continued dividends and buybacks.
- Heavy institutional ownership and net inflows suggest support if the stock confirms a breakout back above key moving averages.
Darden Restaurants, Inc.'s (NYSE: DRI) stock is flashing a potential trend-following entry in late December after a sharp 2025 pullback.
The thesis is simple: the long-term uptrend appears intact, momentum indicators are turning, and fundamentals—along with institutional positioning—create a credible path to market-beating total returns in 2026 if the stock clears nearby resistance.
Darden Restaurants Pulls Back to Trend-Following Entry Point in Q4
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Click here to learn moreWeekly price action for DRI stock has been in an uptrend since 2014, interrupted mainly by COVID-19 volatility.
The more recent activity shows a strong 2024 advance that not only broke price action out of an Ascending Triangle pattern (a consolidation with flat highs and progressively higher lows) but also set a new all-time high. That move was supported by growth, margin strength, and capital returns.
The 2025 price action is less obviously bullish, with the stock falling about 25% from its peak to the November 2025 low. Still, the long-term uptrend has not been broken.
That drawdown wasn't pleasant, but it did two useful things for trend followers: it pulled price back toward long-term support and allowed momentum gauges to unwind from extended conditions.
Specifically, momentum indicators such as the moving average convergence divergence (MACD) and stochastic have reset, suggesting the market has room to resume higher. A critical exponential moving average—the 150-week EMA, a long-term buy-and-hold support—has also been converging with the uptrend line for years. The takeaway in late December is that support at this longer-term indicator is advancing, setting the stage for a rebound that has already begun.
The MACD and stochastic, which measure momentum and trend, point to a technical trend-following entry. The recent price rebound, combined with bullish crossovers in stochastic and MACD, constitutes an entry signal and suggests the stock can retest prior highs and potentially move higher in 2026. Investors should note, however, that late-December action hit a nearby ceiling that will need to be cleared.
The Next Hurdle: Reclaiming the 150-Day EMA to Confirm Accumulation
Even with improving momentum, the chart still has a clear test: reclaiming the 150-day EMA. Many investors treat that line as a proxy for intermediate-term accumulation. While price sits below it, rallies can stall; when price pushes back above and holds, it often signals that dip buyers are back in control.
At the moment, the market appears to be digesting the rebound that followed the most recent earnings catalyst. A clean push above the 150-day EMA—followed by a successful retest—would provide added confirmation for traders who want more than an initial bounce.
Earnings Catalyst: What Darden Just Reported and Why It Matters
The earnings results for fiscal Q2 (FQ2) showed year-over-year revenue growth accelerating to over 7%, outperformance versus expectations, and healthy margin expansion driven by the core business and comparable-store sales.
Cash flow and capital returns were solid, including a 3.1% dividend yield and ongoing share buybacks.
Buybacks are meaningful: share count fell about 1.2% in the first fiscal half, and buybacks are expected to remain robust in the second half.
While restaurant results helped spark the move, analysts and institutions have reinforced it. The FQ2 release prompted several price-target increases and upgrades, supporting the Moderate Buy rating and a roughly 20% upside forecast. Institutional investors are buying aggressively: they now hold more than 90% of the stock, and 2025 activity shows roughly $2 in purchases for every $1 in sales.
With institutional accumulation and improving technicals, DRI's downside appears limited and upside potential meaningful—provided it clears nearby resistance and reclaims key moving averages.
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