Bloomin’ Brands, Inc. (BLMN) operates in the casual dining sector, owning well-known chains like Outback Steakhouse and Carrabba’s Italian Grill. Although the company has steady revenue, its stock has dropped over 25% since August. This decline is due to tighter profit margins and fewer customers, along with lowered annual earnings forecasts. On December 11th, 2025, BLMN’s stock moved above a long-term downward trendline that started in November 2024, signaling a possible recovery. Currently, the stock is testing this trendline again, but we should proceed with caution. End-of-year tax-loss selling could hinder progress. Important technical levels to watch are $6.21 and the November low of $5.90, which are essential for any potential reversals. Resistance levels are at $7.86 and $8.50. If these are exceeded, the stock might rally towards $11.00. With a 45% drop this year, a strong recovery could be on the horizon if trends support it. Given the retest of the trendline, we should consider January call options to take advantage of a possible rally. The stock is oversold, making this a good entry point for a bullish position. Since the stock is near its lows, options premiums currently present a favorable risk-to-reward situation for a rebound. Recently, there has been a significant rise in open interest for January and February call options, particularly at the $7.50 and $8.00 strike prices. This indicates that other traders expect a price increase after the new year. Moreover, implied volatility has decreased from its recent peak, making these call options more affordable than a few weeks ago. This trading strategy aligns with recent economic data. A report on consumer spending revealed that the casual dining sector performed better than expected, with only a 0.5% decline compared to the anticipated 2% drop. Additionally, wholesale food prices, especially for beef, have fallen by 3% since October 2025, which could alleviate some margin pressures. However, the main risk is if the stock fails to hold at this retest. We must closely monitor the $6.21 and $5.90 support levels. If the stock falls below the November low of $5.90, that could invalidate our bullish outlook, suggesting we might need to buy puts or exit long positions. These levels should guide our stop-loss strategies for bullish trades. We saw a similar trend in the restaurant industry after the downturn in 2022. Stocks that weathered tax-loss selling in December often rallied strongly in the first quarter of the following year. Once the selling pressure from tax-loss harvesting eases in January, technical setups like this generally have a higher chance of success.

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