From a fundamental viewpoint, the company shows some weaknesses. Recently, revenue and earnings estimates for the two next years have been revised downward by analysts. Moreover the company seems overvalued compared to its peers. In facts, with an EPS estimated at USD 0.5 for 2015 and USD 0.63 for 2016, Krispy Kreme Doughnuts is currently paid 32.59 and 25.93 times the estimates. When announcing its 2015 first quarter results, the company missed the analysts’ forecasts on every level. It also lowered its own guidance for the full year fiscal results.

Technically, the security follows a downward trend since November 2013 when an important bearish gap formed. The lowering of its guidance recently formed a second gap that adds to the bearish pressure. In addition, moving averages are still slumping. Therefore, the breakdown of the USD 16 support will be a strong sell signal to test new lower levels.

In consequence, a short position could be taken under USD 16 aiming for a return to USD 14. Nonetheless a stop loss will be placed over this level to protect from a possible reversal movement.