Jack in the Box (JACK) - Get Report was downgraded by TheStreet'sQuant Ratings service today. Prices had been working lower since December so maybe a downgrade is not a big surprise, but the weekly chart shows key support around $90 and this downgrade near an important support level raises the odds of a significant decline. Do I have your attention now?
Let's dig deeper into the charts and indicators.
In this daily bar chart of JACK, below, we can see that prices are below the declining 50-day moving average line and the flat to slightly declining 200-day moving average line. JACK has found support in the $95-$90 area a few times over the past twelve months but the weak On-Balance-Volume (OBV) recently suggests that this time is different. Normally that is a dangerous phrase but what is different this time is that the OBV line is not improving with prices. Without signs of aggressive buying JACK is likely to decline further. There is a July-August bullish divergence from the momentum indicator but I do not think that this will reverse the current decline.
In this weekly bar chart of JACK, below, we can see that prices are below the rolling over 40-week moving average line. The weekly OBV line has weakened the past two months which is a break from its past trend. The weekly MACD oscillator is below the zero line for an outright sell signal since early July. A close below $90 looks like it could open the way to a longer-term decline to around $75.
In this Point and Figure chart, below, we can see a relatively large distribution pattern with a downside price target of $74-$73.
Bottom line: JACK could bounce a little more but it looks like the bear is in control and further declines are possible. With a close below $90 the path looks like it is headed to the mid-$70's.
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(This column originally appeared today on Real Money, our premium site for active traders. Click here to get great columns like this from Bruce Kamich, Jim Cramer and other writers even earlier in the trading day.)
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