The well-known American fast-food restaurant chain, Jack in the Box Inc. (NASDAQ: JACK) seems to be ready for a price surge in the near-term.
Bullish Indications
#1 Channel Breakout: The daily chart of JACK shows that the stock was trading within a downtrend channel for the past few months. This channel is marked on the daily chart in purple color. Currently, the stock has broken out of the channel with high volume. This seems like a possible bullish indication.
Daily Chart – JACK
#2 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX has started rising from below both (+DI) and (-DI). These point to a possible upmove in the near-term.
[hana-code-insert name=’adsense-article’ /]#3 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is above the MACD signal line (orange color).This is a possible bullish setup.
#4 Above MAs: The stock is currently trading above both 50-day and 200-day SMA, indicating that the bulls are currently in control.
#5 IH&S Pattern: The daily chart shows that the stock has broken out of an inverted head and shoulders pattern.
This pattern is marked in orange color.
A breakout from a bullish pattern like IH&S pattern indicates the possibility of an upmove.
#6 Fibonacci Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again. JACK has currently taken support at 23.6% Fibonacci support level as seen in the weekly chart. This seems like a good area for the stock to move upwards.
Weekly Chart – JACK
#7 Rising Stochastic: The %K line is currently above the %D line in the stochastic. This indicates possible bullishness.
#8 RSI Strong: Relative strength index (RSI) is currently above 50 after moving up from oversold levels in the weekly chart. This indicates the strength of the current upmove.
#9 MACD above Signal Line: In the weekly chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a potential buy signal.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can the shares of JACK if it crosses above the long-term resistance level of $92.
TP: Our target prices are $105 and $115 in the next 3-6 months.
SL: To limit risk, place a stop loss at $87. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 14% to 25% in the next 3-6 months. For a risk of $5.00, our first target reward is $13.00 and the second target reward is $23.00. This is a 1:3 and 1:5 risk-reward trade.
In other words, this trade offers nearly 3x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the IH&S pattern and channel breakout level. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any new government rules or regulatory changes in its sector.
Happy Trading!
Tara
[hana-code-insert name=’MMPress 2′ /]